02 January 2014 20:00 [Source: ICIS news]
HOUSTON (ICIS)--Polyethylene prices in Latin America have been influenced by many factors such as the cost of raw materials or changes in availability of resins, but the factor that has had the greatest impact in 2013 has been volatility in currency fluctuations, which is expected to continue in 2014.
The impact of those fluctuations has been different in every country, depending on how each country deals with the fluctuations of the US dollar.
Take, for instance, the case of Venezuela, where the exchange rate is fixed. The only change seen in the year has been brought by a currency devaluation implemented in February and corrected in March with new regulations for pricing complementary imports.
Brazil sets the price in Brazilian reais and does not compensate automatically for currency fluctuations. In a graph like the chart below, expressed in US dollars and tonnes (USD/MT), the Brazilian price curve may go up or down without any movement of the price in reais. Colombia and Mexico use this method, too, with sporadic increases.
In the case of Argentina, the prices are set in USD/MT, which are converted to Argentine pesos at invoice time. This creates a much flatter curve, because the currency fluctuations are ironed out of the graph by the constant adjustment of the domestic price. Chile does something similar.
There have not been production capacity increases in 2013 and none are expected to occur in 2014, suggesting that any gains in regional PE demand will have to be covered with imports.
The only project under construction is Mexico’s Ethylene XXI joint venture between Braskem and Idesa, on schedule to start production during the second half of 2015.
The company has already started pre-marketing of PE plastic resins in Mexico to ease its entry into the market.
Venezuela and Bolivia also appear to be getting close to final approval of polyolefins projects which could be ready to start up in 2017 or later. But this remains to be seen.
In the meantime, PE imports will continue to play an increasing role in Latin America as demand grows with demographic gains and with the economic development of the region.
RECENT LATAM LDPE PRICES
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
Asian Chemical Connections