Chile’s PE demand softens on price uncertainty

24 July 2013 23:09  [Source: ICIS news]

HOUSTON (ICIS)--Polyethylene (PE) demand in Chile has declined in recent weeks as buyers contend with price uncertainty ahead, a distributor said on Wednesday.

Offers of imported low density PE (LDPE) product have been steady of late at levels around $1,600-1,650/tonne CFR (cost and freight) Chile main port.

At the same time, domestic production of that grade has been selling in the range of $1,650-1,750/tonne DEL (delivered).

The local producer initially sought to increase prices by $50/tonne in July, but the hike did not take hold.

“Buyers set the price these days,” a distributor said. “We see people selling resins at their cost only to protect themselves from potential losses if prices decline.”

The domestic plant has a nominal capacity of about 42,500 tonnes/year in a market that consumes about 140,000 tonnes/year.

Clearly, PE imports play a big role in Chile’s supply, helping to keep domestic price levels competitive.

Some market participants attribute the slowdown to uncertainties about upcoming presidential elections in the country.

Others favour the notion that weakness in the global economy has started to affect markets in Chile.

Uncertainty in global PE markets is making import purchases more risky, considering that with Chile’s geographical location in the south end of South America, buyers need to trust that prices will not go down in the next 60 days.

Spot PE prices in the US Gulf are marginally suitable for exports to Chile, and in addition, feedstock ethylene prices are perceived as steady or likely to decline slightly in the short term, after the return of crackers that were idled by maintenance works.

“I am afraid to make a purchase from Korea at $1,620-1,630/tonne CFR,” a buyer said.

“Why taking risks when product from Brazil arrives here at slightly higher levels?” the buyer added.

Material from the Middle East sells in a different fashion. Material already on the water has a “floating” price that is quoted only 10 days before the ship arrives to its destination.

Buyers are increasingly embracing this purchase modality because it reduces risks.

Another obstacle is brought by financial conditions. Transformers in Chile are used to pay in 90 days, while many international sellers only accept 60-day payment terms, adding financial strain for distributors and middlemen.

($1 = €0.76)

By: George Martin
+1 713 525 2653

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