AFPM ’19: Latin America PS markets surging but not in all countries

HOUSTON (ICIS)–Heading into this year’s International Petrochemical Conference (IPC), Latin America polystyrene (PS) markets are regaining strength on the back of higher crude oil prices, and the run is poised to extend into April. However, the prospects are uneven in Latin America.

The price of West Texas Intermediate (WTI) crude oil is nearly at $60/bbl, a level last seen in November last year, when crude oil prices were on their way down.

WTI hit a low of nearly $45/bbl in December and has been recovering in the last three months. At first, it was not clear whether the recovery would be sustainable, but it appears that it will be.

Downstream, aromatics and the styrene chain are showing some gains that have translated into price increases for all grades of polystyrene (PS).

Argentina’s main domestic producer, Pampa Energia, increased the price of all grades of PS by 6% effective March 11, the second increase this month. The hike was intended to compensate for currency devaluation. The previous one, a 2.5% increase, responded to raw material prices.

Transformers continue to see slow demand from all sectors and see these increases as difficult to transfer to their customers.

The economy is constrained by inflation, high interest rates, high tariffs, export taxes and uncertainty in a year of presidential elections.

Prices are rising in Mexico, where producers have announced price increases of up to 4 cents/lb. The actual increase could be lower.

Similar increases have been posted in US markets, although one producer has specified only a 2 cent/lb increase.

Mexico expects increased demand from the white line (appliances), but this seasonal demand will be over soon. Demand from disposables will likely rise in coming months.

However, in many Latin American countries, prices have been steady in March. This responds to special demand circumstances in each country. Sometimes, price changes have a 30-day delay to reflect shipping constrains for volumes from other regions.

Brazil and Colombia are countries where PS prices did not rise. Demand has not been strong enough, despite the seasonal surge of disposables demand due to high temperatures.

Brazil had shortages of styrene monomer that could have justified some increases, but prices instead were mostly stable, and in some cases, slightly lower.

Price increase initiative keep piling up for April amid additional 4 cent/lb increase initiatives.

Prices are rising in Asia, providing arbitrage reasons to justify price hikes in the short term. However, crude oil prices will be the wild card. If the current spike is sustained, chemical prices downstream are almost guaranteed to continue rising.

Instead, if the crude run fizzles, supply/demand forces will determine the fate of PS, and demand is not strong in most of Latin America at this time.

Demand has declined abruptly in Venezuela, where only imported PS resins are used. The local PS plant has been down for years on lack of raw materials, and lack of hard currency for imports of styrene monomer.

PS prices are starting to rise in a couple of Latin American countries, but have remained steady in others. Prospects remain bullish for April.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 24-26 March in San Antonio, Texas.

Focus article by George Martin