South African rand at four-year low hurts PE, PP imports

21 May 2013 16:55  [Source: ICIS news]

LONDON (ICIS)--A further weakening of the South African rand against the US dollar is causing difficulties for South African importers of polyethylene (PE) and polypropylene (PP), sources said on Tuesday.

Having weakened for the ninth consecutive session, the rand has reached a new four-year low following demands from an industrial union for a signifiant pay rise, according to a CNBC news report.

Reports emerged during the weekend that the National Union of Mineworkers is seeking pay rises of up to 60%.

There are fears that industrial action in the mining sector could spread and affect the country's credit rating.

A South African producer said on Tuesday: “The rand continues to weaken against all major currencies, and has been doing so since the beginning of the month. This will affect costs as well as prices if it continues to stay at the present levels. Importers will definitely be feeling this.”

A South African distributor said: “It’s very difficult [more expensive] for importers. There’s 9.56 rand to the US dollar. It’s not helped the import side of it. It helps people who already have stocks on the ground [those who purchased volumes when the rand was stronger]. With the rand at the moment, people are staying away from imports.”

A weaker rand makes it more expensive to purchase volumes from overseas.

In turn, if volumes were purchased under such conditions, it is likely that the costs might be passed on to customers.

However, flat demand and the traditionally slow winter season in South Africa would unlikely support higher prices.

At 15.15 GMT on Tuesday, there were 9.57 South African rand to the US dollar.

By: Jo Pitches
+44 208 652 3214

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