Venezuela’s currency devaluation fuels polyolefin uncertainty

13 February 2013 22:11  [Source: ICIS news]

HOUSTON (ICIS)--The currency devaluation announced by Venezuela in exchange agreement No. 14, effective 9 February, has generated uncertainty for polyolefin producers and transformers, local sources said on Wednesday.

Transformers have received a letter from state-owned producers and distributors of plastic resins announcing that all deliveries of plastic resins have been suspended until decisions are made about their pricing.

The official exchange increases to Bs6.30 per dollar from Bs4.30 per dollar, but there are several exceptions to this mandate, depending on the date or item category.

It is not clear how the production, sales and distribution of plastic resins will be affected.

Venezuela has price controls for items consumed by the general public. If transformers increase prices of finished plastic products, those increases will be rejected by the buyer if it cannot pass the extra costs to the final consumer.

Transformers do not know how to invoice clients, and this uncertainty has paralysed markets.

Some have suspended deliveries until the rules are explained in detail. Others have maintained deliveries at the old prices, expecting a fair treatment from government officials.

The plastic resins sold in Venezuela carry a certain proportion of imports that have traditionally carried a premium over locally-produced resins. It is not clear if the new exchange agreement will affect imports only or all resins, regardless of origin.

Market participants expect a clarification of the rules before the end of this week.

($1 = €0.74, $1 = 6.30Bs)

By: George Martin
+1 713 525 2653

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