Argentina PVC prices roll in Sep as economy adjusts

02 September 2016 16:45 Source:ICIS News

Focus article by Ron Coifman

HOUSTON (ICIS)--Argentina’s September polyvinyl chloride (PVC) prices rolled over from August amid a quiet market in line with the dynamics of ailing economies in major troubled countries in South America.

Industry participants in Argentina said this week that no emails arrived, telephones did not ring and no purchase orders or even inquiries were received.

Sources in Argentina had expected activity to pick up in August and September in the southern cone of South America, but noted that business in Chile, Brazil and Uruguay was muted.

Resin supply is currently easily meeting industry requirements, according to sources.

Industry participants in Argentina continue to adjust to new legislation that eases imports and removes subsidies on energy provided to industry.

The government had introduced substantial price increases on energy in early 2016 to reduce costly subsidies that the previous government paid. Still under discussion, removal of the subsidies was intended to draw investors to increase natural gas production and to cut imports by reducing end-user consumption.

A public hearing to review residential rates for natural gas in Argentina is set for 16 September.

Import restrictions were eased after President Mauricio Macri assumed office in late 2015, and domestic PVC prices dropped to compete with cheaper imports from Colombia and the US.

However, despite easing business legislation under Macri’s new government, a marked currency devaluation has resulted in decreased purchasing power, as salaries have not increased in line with the cost of living.

Market sources in Argentina cautioned about inflation, higher prices, the loss of purchasing power and salary adjustments to come as a result of the devaluation. Sources had projected hard times ahead, noting uncertainty while the political and economic transition with the new government had been expected to be gradual.

Still, industry participants expect conditions to improve by the end of 2016, as the economy adjusts to the new conditions.

Clearer direction for PVC demand from the construction sector in Argentina could emerge a little earlier. The weather starts to warm at the end of September with the beginning of spring, and construction initiatives could be strengthening by mid-October to November.

In other countries in South America, PVC domestic prices were set to roll over in September from August on soft demand even as prices in Asia rose for September.

PVC prices have remained flat since early August, when PVC prices had increased in most Latin American countries, trending with higher prices in the US and Asia.

Activity is gauged as moderate throughout Latin America. Demand remains particularly weak in Brazil, Argentina and Venezuela, slowed by troubled economies and various political and social issues.

Brazil President Dilma Rousseff was impeached on 31 August and her vice president, Michel Temer, replaced her for the remainder of her term.

In Venezuela, the opposition held “The Taking of Caracas” demonstration on Thursday to call attention to the proposed recall of President Nicolas Maduro.

Business in general was soft but in line with expectations in Mexico and in countries along the Pacific coast of South America, which are enjoying greater political stability.

PVC demand was gauged as healthy in the US and Mexico during the summer construction season, but is expected to soften with the beginning of autumn.

By Ron Coifman