OUTLOOK ’17: Latin America caustic soda soft but steady
Ron Coifman
04-Jan-2017
By Ron Coifman
HOUSTON (ICIS)–The Latin America caustic soda market is projected as steady but soft in the face of troubled economies in South America.
Demand in Latin America from major consuming industries, such as pulp/paper, alumina, and soaps and detergents is stable though not spectacular, according to regional market sources.
Caustic soda markets benefit from a wide variety of applications, in addition to those listed above. Other consuming sectors include petroleum products, water treatment, textiles, metal processing, mining and glass making. As a result, a decline in demand from one sector might be at least partially offset by an increase from another sector.
Troubled major economies of Brazil and Argentina are expected to recover gradually in 2016, improving the outlook for next year.
The recession in Brazil and a wide-spread corruption scandal have taken a heavy toll on industry and commerce in 2016. Sources in Brazil said that business is set to improve next year under the presidency of Michel Temer after the impeachment of Dilma Rousseff.
In Argentina, President Mauricio Macri devaluated the peso and removed subsidies on energy soon after he took office at the end of 2015. Under these conditions, inflation rose and the population’s purchasing power decreased, slowing the economy.
Claiming that the country rests on a solid economic foundation, local sources are projecting more controlled inflation for 2017 and reactivation of business and industry including construction, a major economic driver.
Domestic demand in Venezuela has greatly weakened, with no immediate recovery expected. Despite the country’s substantial oil reserves, the economy is in a shambles.
Most essential products are in short supply, as the population struggles to obtain food, medicines and personal hygiene items. Under current conditions, it is difficult to project substantial improvement in Venezuela for 2017.
In addition to domestic uncertainties in various countries in Latin America, market participants have expressed concern about the policies that US President-elect Donald Trump might pursue once in office.
Trump has voiced objections over current trade agreements and over US immigration policies, which could affect PVC business in Latin America and other global regions.
Rising crude oil prices are another source of market uncertainty, regional sources said.
As a reference, International Monetary Fund (IMF) GDP projections are listed. The IMF is expecting a recovery in GDP growth in Latin America for 2017, compared with 2016, according its World Economic Outlook of October 2016. The IMF projections for the Americas will provide insight into general demand by country.
The IMF is projecting GPD growth in South America to rise from -2% in 2016 to +1.1% in 2017, according to its October projection. In its April publication, the IMF had projected South American GDP growth at -2% for 2016 and +0.8% for 2017.
The numbers in the chart below show the GDP projections from the IMF’s World Economic Outlook of October 2016 and of April 2016, side by side for comparison purposes.
The projections are mixed depending on country, with most countries expanding this year, while others, mainly Brazil, Argentina, and Venezuela, continued to show negative growth in 2016.
|
|
Oct-2016 |
Apr-2016 | ||
|
|
2016 |
2017 |
2016 |
2017 |
|
|
|
|
|
|
|
North America |
1.6 |
2.2 |
2.3 |
2.4 |
|
US |
1.6 |
2.2 |
2.4 |
2.5 |
|
Canada |
1.2 |
1.9 |
1.5 |
1.9 |
|
Mexico |
2.1 |
2.3 |
2.4 |
2.6 |
|
P Rico |
-1.8 |
-1.4 |
-1.3 |
-1.4 |
|
|
|
|
|
|
|
South America |
-2 |
1.1 |
-2 |
0.8 |
|
Brazil |
-3.3 |
0.5 |
-3.8 |
0 |
|
Argentina |
-1.8 |
2.7 |
-1 |
2.8 |
|
Colombia |
2.2 |
2.7 |
2.5 |
3 |
|
Venezuela |
-10 |
-4.5 |
-8 |
-4.5 |
|
|
|
|
|
|
|
Chile |
1.7 |
2 |
1.5 |
2.1 |
|
Peru |
3.7 |
4.1 |
3.7 |
4.1 |
|
Ecuador |
-2.3 |
-2.7 |
-4.5 |
-4.3 |
|
Bolivia |
3.7 |
3.9 |
3.8 |
3.5 |
|
Uruguay |
0.1 |
1.2 |
1.4 |
2.6 |
|
Paraguay |
3.5 |
3.6 |
2.9 |
3.2 |
|
|
|
|
|
|
|
Central America |
3.9 |
4.1 |
4.3 |
4.3 |
|
|
|
|
|
|
|
Caribbean |
3.4 |
3.6 |
3.5 |
3.6 |
Source: IMF
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