LatAm Polyol, Isocyanate Demand Drops as Currencies Weaken
HOUSTON (ICIS news)--Weakening currencies and the US-led global recession contributed to soft demand and growing uncertainty in Latin American isocyanates and polyol markets, market participants said on Thursday.
Most market participants struggled with weakening monetary values and attributed the current economic situation to the declining US housing market as the trigger of the global financial crisis.
With US new home construction falling to record lows in January, Latin American manufacturers worried that demand for finished products would weaken further.
“Demand fell sharply in November [2008] as banks strongly restricted access to credit and mortgages,” a Latin American trader said. “We have seen large decline in demand for finished products and sales are way behind.”
Participants said that despite lower prices, product was changing hands at a very sluggish pace due to the lack of demand for finished products, which had declined by 30-35%.
At the same time, foam producers are contending with weaker currencies, a trend that is raising the cost of imported feedstock.
According to market analysts, the Chilean peso, once the best performer of Latin American currencies, fell following the release of the US housing report on 18 February and then again on Thursday as it registered the largest decline in three months.
Argentina’s peso fell to its lowest level since December 2002 as the deepening global recession sparked concerns that demand would continue to weaken.
Mexico's currency has lost about one-third of its value against the dollar since August, a Mexican chemical buyer said. The drop spurred the country's central bank to intervene directly in currency markets this month, according to market analysts.
Even countries that use the US dollar are facing economic uncertainty.
Latin America economists have said that Ecuador’s use of the dollar gives the country no outlet for providing credit to the economy as access to foreign financing dries up and revenue from the nation’s largest export, oil, declines.
Meanwhile, many buyers and sellers in Latin America said President Hugo Chavez’s victory in the 15 February referendum increased the risk associated with doing business in that market.
Analysts and experts familiar with the referendum said that economic problems in Venezuela are going to become more evident as the global recession worsens.
One of the largest suppliers of crude to the US, Venezuela depends on oil for 93% of the country’s export revenue and half the government’s budget, market analysts said. Prices for crude have plunged since breaking records in July 2008.
President Chavez will have to make adjustments to economic policy that will probably include raising taxes and devaluing the currency, a Latin American trader said.
“Many companies will not deal with Venezuela because it is hard to get paid and Ecuador might default on bond payments,” a buyer said. “The situation here is not good and demand is gone”.
Methyl di-p-phenylene isocyanate (MDI), toluene di-isocyanate (TDI) and polyols are mainly used in the production of polyurethane (PU) foams which are widely used in the housing and construction sectors.
Latin TDI spot prices were in a range of $2,300-2,500/tonne (€1,840-2,000/tonne) CFR (cost and freight) Latin American port, according to data from global chemical market intelligence service ICIS pricing.
Major Latin American isocyanates and polyol producers include Dow Chemical, BASF and Petroquimica Rio Tercero.
Most market participants struggled with weakening monetary values and attributed the current economic situation to the declining US housing market as the trigger of the global financial crisis.
With US new home construction falling to record lows in January, Latin American manufacturers worried that demand for finished products would weaken further.
“Demand fell sharply in November [2008] as banks strongly restricted access to credit and mortgages,” a Latin American trader said. “We have seen large decline in demand for finished products and sales are way behind.”
Participants said that despite lower prices, product was changing hands at a very sluggish pace due to the lack of demand for finished products, which had declined by 30-35%.
At the same time, foam producers are contending with weaker currencies, a trend that is raising the cost of imported feedstock.
According to market analysts, the Chilean peso, once the best performer of Latin American currencies, fell following the release of the US housing report on 18 February and then again on Thursday as it registered the largest decline in three months.
Argentina’s peso fell to its lowest level since December 2002 as the deepening global recession sparked concerns that demand would continue to weaken.
Mexico's currency has lost about one-third of its value against the dollar since August, a Mexican chemical buyer said. The drop spurred the country's central bank to intervene directly in currency markets this month, according to market analysts.
Even countries that use the US dollar are facing economic uncertainty.
Latin America economists have said that Ecuador’s use of the dollar gives the country no outlet for providing credit to the economy as access to foreign financing dries up and revenue from the nation’s largest export, oil, declines.
Meanwhile, many buyers and sellers in Latin America said President Hugo Chavez’s victory in the 15 February referendum increased the risk associated with doing business in that market.
Analysts and experts familiar with the referendum said that economic problems in Venezuela are going to become more evident as the global recession worsens.
One of the largest suppliers of crude to the US, Venezuela depends on oil for 93% of the country’s export revenue and half the government’s budget, market analysts said. Prices for crude have plunged since breaking records in July 2008.
President Chavez will have to make adjustments to economic policy that will probably include raising taxes and devaluing the currency, a Latin American trader said.
“Many companies will not deal with Venezuela because it is hard to get paid and Ecuador might default on bond payments,” a buyer said. “The situation here is not good and demand is gone”.
Methyl di-p-phenylene isocyanate (MDI), toluene di-isocyanate (TDI) and polyols are mainly used in the production of polyurethane (PU) foams which are widely used in the housing and construction sectors.
Latin TDI spot prices were in a range of $2,300-2,500/tonne (€1,840-2,000/tonne) CFR (cost and freight) Latin American port, according to data from global chemical market intelligence service ICIS pricing.
Major Latin American isocyanates and polyol producers include Dow Chemical, BASF and Petroquimica Rio Tercero.
source: www.ICIS.com
