OUTLOOK ‘15: Crude prices, currency woes, tight supply rule LatAm PE

HOUSTON (ICIS)–Polyethylene prices in Latin America have added crude oil values as one more influence factor for 2015 to go with tight supply and currency devaluations.

The unexpected fall of crude oil prices at the end of 2014 has restored competitiveness to naphtha-based petrochemicals, improving the prospects of Asian and European producers.

Asian products are the most likely to show up in Latin America at competitive prices that will pressure regional suppliers to compete.

Supply will remain a problem in the American continent considering that the Ethylene XXI project in Mexico will be the only additional source of  PE material in 2015, and this will not happen until the end of the year. This production is expected to have most of its impact in 2016.

For this reason 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.

Currency fluctuations have affected countries in different ways, but there are no reasons to think that volatility will disappear in 2015.

Dollar values have gone up sharply in the last quarter of 2014, motivating plastic resin producers to adjust prices accordingly.

Currency volatility has varied with each country. The most affected has been Colombia, where the US dollar has gained more than 26% in the second half of 2014.

The dollar went up by 20% over the Brazilian currency, while in Mexico and Chile the dollar gains have been of the order of 12% in the same period.

The official Argentine currency has declined about 5% in the same period, but black market rates put the dollar slightly over PS13/dollar.

Venezuela used to have only one official rate, at a fixed rate of Bs6:30/dollar. Now has two other official rates called SICAD 1 (Bs12/dollar) and SICAD 2 (Bs50/dollar) in addition of a black market rate that has been lately talked at about Bs150/dollar.