PVC market faces critical conditions in Venezuela

19 August 2016 17:14 Source:ICIS News

The National Bolivarian Guard blocks citizens during a protest over the shortage of food and medicines near the Miraflores Palace, in Caracas, Venezuela. (Xinhua News Agency/REX/Shutterstock)
Demand remains weak as the population grows more concerned about obtaining scarce food, medicine and other essential supplies. Above, t
he National Bolivarian Guard blocks citizens during a protest over shortages near the Miraflores Palace, in Caracas, Venezuela. (Xinhua News Agency/REX/Shutterstock)

Focus article by Ron Coifman

HOUSTON (ICIS)--Polyvinyl chloride (PVC) domestic prices in Venezuela have been assessed as stable for several months because of government controls, although prices in US dollars fluctuate.

Demand for non-essentials in general, including demand for PVC, remains weak as the Venezuelan population is more concerned about obtaining scarce food, local sources said on Thursday.

Even staples such as rice, coffee, milk and sugar are difficult to obtain. Likewise, soap, detergents, deodorant and other personal hygiene and cleaning products are not easily available.

According to the Venezuelan Observatory of Health, the average citizen has lost 3-5kg of weight this year.

To help alleviate the lack of essentials, officials permanently opened Venezuela’s border with Colombia this week.

Venezuelans can now cross over into Colombia on foot, but not in vehicles, for several hours every day, local sources said. A few recent temporary openings offered only limited hours of access.

Venezuelans are allowed to purchase food and medicine in Colombia, but not industrial or commercial products.

Voters already are registering for a possible recall election for President Nicolas Maduro. Media reports suggest the vote is unlikely this year. (Xinhua News Agency/REX/Shutterstock)As conditions grow more dire, local sources said that a movement called “the taking of Caracas” is scheduled for 1 September, with a planned peaceful demonstration to call attention to the proposed recall of President Nicolas Maduro.

The persistent devaluation of the Divisa Complementaria (Dicom) currency exchange applied to industrial products continues to place downward pressure on the equivalent prices in US dollars.

In the case of PVC trade, prices are at $930/tonne with Thursday’s Dicom rate at Bs645 to the US dollar.

PVC prices now are at bolivar (Bs) 600,000/tonne, including shipment and other expenses to place the product at resin processors’ plants.

Previously, the Sicad exchange rate had been applied to translate PVC prices from bolivares to US dollars. The Sicad rate disappeared with new currency regulations, and was replaced with the Dicom in March.

Before 1 July, the government had fixed PVC prices at Bs158,000/tonne and, because of the devaluation, the equivalent in US dollars had decreased to about $250/tonne, significantly below international prices for PVC.

Previously at Bs6.3/US dollar, the official currency exchange rate used for essential prioritised products such as medicines currently stands at Bs10/US dollar and has been named the Divisa Protegida (Dipro) rate.

Several currency exchanges, the lack of foreign currency to pay for imports, and the strong devaluation of the parallel-market currency continue to distort Venezuela's troubled economy.

PVC demand in Venezuela is weak because construction activity has practically halted and, as a result, PVC pipe production is minimal.

Local sources said that PVC supply currently exceeds demand, which had been significantly reduced because of the country’s ailing economy. Until two or three months ago, PVC volumes shipped by the domestic producer had not been meeting resin processors’ modest requirements.

Caracas residents protest the food and medicine shortage crisis in June near the Miraflores Palace. (Xinhua News Agency/REX/Shutterstock)
Caracas residents protest the food and medicine shortage crisis in June near the Miraflores Palace. (Xinhua News Agency/REX/Shutterstock)

Political and economic conditions are precarious, amid attacks on food trucks, supermarkets, and warehouses because of critical shortages of food, sources said.

The population is dedicating more resources and time to obtaining scarce food and indispensable toiletries, sources said, while demand for non-essential products has declined.

Meanwhile, Venezuelans also have been crossing the open border to Brazil to obtain food and essential products.

Drought conditions have eased on recent rains in Venezuela, sources said, and although water rationing continues, electricity has mostly been restored. Still, water in Caracas is available only for a limited time on a few specific days each week.

Venezuela’s sole domestic PVC producer is Pequiven.

Venezuela bolivar exchange rate vs US dollar

 

22 Jul

29 Jul

5 Aug

12 Aug

18 Aug

Dicom

642

643

645

644

645

Parallel

1,008

1,008

1,003

1,009

1,011

Dipro

10.0

10.0

10.0

10.0

10.0

 

Empty supermarket shelves in Caracas illustrate the critical conditions in Venezuela. (Agencia EFE/REX/Shutterstock)

Empty supermarket shelves in Caracas illustrate the critical conditions in Venezuela. (Agencia EFE/REX/Shutterstock)

 

SMALL IMAGE: Voters already are registering for a possible recall election for President Nicolas Maduro. Media reports suggest the vote is unlikely this year. (Xinhua News Agency/REX/Shutterstock)

By Ron Coifman