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24 February 2017

Caustic Soda
Latin America
Chemical Prices | News | Analysis Editor:Ron Coifman

DOMESTIC PRICES BY COUNTRY


Price Range
Ex-Tank Argentina USD/dmt n/c 575.00-590.00 n/c
Ex-Tank Brazil USD/dmt n/c 430.00-530.00 n/c
Ex-Tank Mexico USD/dmt n/c 740.00-770.00 n/c

IMPORT PRICES BY COUNTRY


Price Range
CFR Brazil USD/dmt n/c 385.00-445.00 n/c
CFR Colombia USD/dmt n/c 420.00-440.00 n/c
CFR Mexico USD/dmt n/c 480.00-500.00 n/c

NOTE: Please clickherefor full details on the criteria ICIS pricing uses in making these price assessments.

Overview Several plant maintenances are planned in the US for February-


March, contributing to reduced availability in the Americas.

Last week, caustic soda prices were assessed up for Argentinas


- Stable caustic soda market at end-February domestic market and for Peruvian exports. Prices in Mexico
rose in early February on support from price hikes in the US,
- Tight supply in US may drive up March prices in Latin though at a lag from the US trend.
America
Caustic soda prices in Brazil have been gauged as steady for a
- Slow economy in Argentina, Brazil prolonged stretch, amid an absence of any pricing initiatives.
- Healthy demand in Mexico, Colombia In the US domestic market, suppliers announced increases
ranging from $60/dry short ton (dst) to $85/dst for second

quarter contracts or as contracts allow, in addition to increases


Latin America previously proposed for the first quarter which are still under
discussion. Tight supply, low inventories, planned and
Caustic soda prices throughout Latin America are projected to unplanned outages, and strong demand drove the hike
remain steady until the end of February. initiatives in the US, but it is too early to predict the outcome of
the proposed increases.

Demand is steady in Mexico and Colombia, soft in Argentina


Latin America caustic soda prices and Brazil, and weak in Venezuela. In South America, business
will slow down early next week because of Carnival celebrations
on 25-28 February.

The market outlook in Colombia and Mexico points to healthy


growth on support from infrastructure projects.

The economic recovery is slower than previously expected in


Argentina and Brazil, according to sources. In Brazil, however,
sources expected significant improvement immediately after
Carnival.

In Brazil, the government adopted measures to allow nearly


30.2 million workers to withdraw the amounts deposited in
inactive workers fund (FGTS), sources said. The government
expects to inject R30bn into the economy. Workers will begin to
have access to these resources, and they can not only pay off
their debts, but also consume and boost the Brazilian economy.
The government hopes that these billions will speed up Brazils
economic recovery, the sources said.

Additionally, sources said that President Temer announced new


guidelines easing access to low-income housing, increasing the
Markets in Latin America continue to face upward pressure maximum limit of household income to qualify. The rules are
from the US, where prices have been gradually rising amid tight expected to stimulate housing construction, according to the
supply. sources.

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Fragile political and economic conditions in Venezuela were US caustic soda contract prices have risen in recent months as
dampening expectations of any significant improvement this follows:
year. In Venezuela, demand in general remains weak because of
the troubled economy, amid shortages of food, medicines and $40/dry short ton (dst) in October; $10/dst in September;
other essential products. Local sources said that conditions $10/dst in August; $15/dst in July; $15/dst in June; $20/dst in
were not likely to improve significantly in 2017. May; $10/dst in April.

US liquid caustic soda export prices were assessed up by


$10/dmt, on business done.
In line with commentary from regional sources this week,
The US chlor-alkali plant operating rate in January rose
Peruvian caustic soda export prices were assessed steady from December.
from last week at:

$535-545/dry metric tonne (dmt) CFR Santos
US Chlor-Alkali Production Rate (%) The Chlorine Institute
$500-510/dmt CFR Colombia/Chile and Ma Ap Ma Jn Jl Au Se Oc No De Ja
84 81 85 84 87 84 84 82 84 87 88
$520-530/dmt CFR Guayaquil, up from

assessments on 6 January at: Argentina

$525-535/dmt CFR Santos Argentinas consumer prices rose 1.3% in January from the
prior month, a new inflation index from President Mauricio
$490-500/dmt CFR Colombia/Chile and Macris revamped national statistics agency (INDEC) reported on
10 February.
$510-520/dmt CFR Guayaquil
Price increases in the Greater Buenos Aires metropolitan area
were led by a rise in recreation and transport costs, which rose
4.7% and 2.3%, respectively, the agency said. Education costs
International trade also rose in January, up by 0.7%, INDEC said. Food costs rose
1.6%, while medical costs rose by 1.4%.
US caustic soda exports are listed, with 39% of US 2016
exports going to Brazil. Inflation, among the world's highest last year, shot even higher
after Macri lifted currency controls in December 2015. The

move weakened the local peso by about 30%, increasing the


Sodium Hydroxide inAqueous Solution, HTS 2815120000 price of imported goods.

Source: US International Trade Commission (USITC)


Argentine domestic automobile production rose by 50.5% in
US Exports Liquid metric tonnes January year on year, but declined by 33.2% over the previous
YTD YTD month, the Argentine Automakers Association (ADEFA) said on
Dec-15 Dec-16 % chg 7 February.
2015 2016
4,711,5 5,723,5 In January, 26,762 vehicle units were produced, ADEFA said.
Total 430,057 494,740 21
18 84
1,924,04 2,248,33 Auto exports hit 9,754 units in January, showing a drop month
Brazil 211,810 144,614 17 on month of 48.1%, and year-on-year numbers saw an increase
7 9
Austral 102,283 98,350 593,120 798,303 35 of 150.9%, according to the trade association.
Mexico 16,102 60,508 267,544 420,173 57
Jamaic 34,594 44,408 376,850 423,897 12
Canada 26,116 40,449 351,040 401,426 14 Argentinas chemical production declined by 1.4% in 2016
over the previous year figures, the country's national statistics
Ireland 220 37,501 165,512 187,760 13
agency said on 7 February. In a comparison of December with
Chile 19,131 21,450 245,496 320,410 31 the same month of the previous year chemical production
Spain 0 15,742 20,261 99,263 390 dropped even further (-4.5%).
Venezu 0 10,799 61,467 55,682 -9
The fields that show increased production in the accumulated
Urugua 2,855 7,758 53,348 67,879 27
January-December totals are basic chemical products at 7.6%,
Others 16,947 13,160 652,831 700,450 7 plastic raw materials and synthetic rubbers with 4.4% growth
and agrochemicals with 4.8% growth.

Fields that declined in 2016 were synthetic and artificial fibres (-


US 11.3%), detergents, soaps and personal products (-10.1%),
US caustic soda contract prices for February rolled over industrial gases (-6.3%) and pharmaceutical products (-0.4%),
from January. according to INDEC, the National Institute for Statistics and
Census for Argentina.
December contract prices were assessed up by $10/dst from
November. Prices for November had rolled over from October. In December year-on-year comparisons, fields with declining
production were synthetic and artificial fibres with a whopping
34.8% drop, agrochemical production with a 27.5% decline,

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followed by detergents, soaps and personal products with a grew by 5.2%. Capacity utilisation reached 80%, up by two
12.2% decline and industrial gases with a 3.6% decline. percentage points compared with 2015.

Overall consumption is down in Argentina after the reduction of Notwithstanding the positive results, Brazils chemical sector
energy subsidies. Salary gains have not kept pace with inflation. has continued to struggle amid high energy prices, low levels of
investment and a weakened economy still reeling from deep
In other sectors, production of plastic products and tyres recession. Chemical production last year was roughly in line
increased by 2.0% in December over the same month of the with 2007 levels, while domestic sales were actually below those
previous year, but in total 2016 production tyres were down by recorded a decade ago, Abiquim said.
1.3% and plastic products down by 1.5% from 2015.

Brazil's total 2016 industrial output declined 6.6% year on


Argentina's industrial output contracted by 4.6% in 2016 year year, state statistical agency IBGE said on 1 February.
on year, the country's newly revamped INDEC statistics agency
said on 1 February. Industrial output for the month of December declined by 0.1%
year on year, IBGE said.
Industrial output for December of 2016 declined by 2.3% year
on year. By segment, some of the largest influences on the downward
yearly total output came from biofuels, coke and petroleum
However, not all sectors declined. Basic chemicals increased by products, with a drop of 9.4% in industrial output. Plastics
7.6% in 2016 year on year, while feedstocks for plastics and products also saw a decline, falling by 7.1% in the 2016 data.
rubber production also increased by 4.4% year on year, INDEC
said. Detergents, soaps and personal products dropped by Biofuels saw a total 2016 drop of 8.5%, IBGE said. Capital goods
10.1%, while agrochemicals rose by 4.8% in 2016 year on year, decreased by 3.2% month on month and recorded a total 2016
INDEC said. Plastics and rubber, including tyres and plastics, drop of 11.1%. Intermediary goods rose by 1.4% month on
dropped by 1.5% over the previous year, INDEC said. month, but saw a 2016 slide of 6.3%. Consumer goods
increased by 1.8% month on month, but recorded a drop of
Austerity measures have taken their toll on the Argentina 5.9% for the total in 2016.
economy. President Mauricio Macri has cut thousands of
government jobs, lowered energy subsidies and allowed the
currency to float, prompting the peso to weaken by 30%.
Mexico

Mexicos economy slowed its pace of growth in the fourth


Brazil quarter of 2016, as the service sector slowed and the
agricultural sector contracted, the country's National Statistics
Brazil's economy is expected to expand by 0.48% in 2017, Institute (INEGI) said on 22 February.
steady with the previous weeks forecast, according to
information from the nation's central bank obtained on 21 GDP, a measure of output of goods and services, expanded by
February. 0.7% from a revised 1.1% in the third quarter, according to
seasonally adjusted data from INEGI. Compared to the same
Inflation continues to progress better than expected and quarter in 2015, GDP expanded by 2.4%, INEGI said. Mexico's
forecast within the bank's target of 2.5-6.5%. Inflation for 2017 agricultural sector contracted 0.3% in the fourth quarter,
was improved from last weeks forecast and is expected to compared with growth of 3.1% in the third quarter 2016, INEGI
reach 4.43%. Inflation for 2018 was forecast stable at 4.5%. said. The services sector also slowed, growing by 0.8% from a
revised 1.3% in the previous quarter, according to INEGI.
Forecasts for other statistics continued to be mixed from the
previous week. For 2017, the exchange rate should be reais (R) Economists have lowered their outlook for growth of the
3.30 by the end of the year, stronger than last weeks forecast. Mexican economy this year to 1.5%, according to a 20 January
The rate for 2018 is expected at 3.40, the central bank said. Banamex poll, due to risks that US President Donald Trump's
policies could limit trade with Mexico. The International
Industrial production for 2017 is expected to increase by 1.0%,
Monetary Fund (IMF) also cut its growth outlook for Mexico in
unchanged compared to last weeks figure, the bank said. In
January this year to 1.7% for 2017 and 2.0% for 2018, a decline
2018 industrial production should grow by 2.10%, the bank
of 0.6% for both years. The fund said that Mexicos economy
said.
would grow less than expected this year due to changes in US
monetary policy, indications of trade protectionism in
Washington and a decline in optimism at the local level. More
Despite a sluggish start to 2016, Brazils chemical sector restrictive financial conditions and unfavourable headwinds will
ended on a relative high after figures released on 6 February by result from its newly uncertain relationship with its northern
trade group Abiquim showed volume growth for the full year in neighbor, the IMF said.
production, domestic sales and demand.

Abiquim, which represents some 160 chemical producers in
Brazil, said the sector benefited from a more stable economic Mexico's annual inflation accelerated to its highest rate in
and political climate, especially in the second half of the year, a more than four years in January, driven by a 14% gasoline price
lower benchmark interest rate and slowing inflation. According hike, data showed on 9 February. Inflation in the 12 months
to the figures, production of industrial chemicals for the whole through January rose to 4.72%, its highest since September
year rose by 4.0% compared with 2015, while domestic sales 2012, the national statistics agency (INEGI) said.
were up by 3.9%. Domestic demand, which is measured by
apparent consumption, or output plus imports minus exports,

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That compared to a rate of 3.36% in December. Compared to Insecurity prevails throughout the country because of several
the previous month, consumer prices rose 1.70% in January, factors, according to local sources.
while the core index rose 0.58% during the month.
Much-awaited larger denomination paper money appeared in
mid-January. Circulation of the Bs500, Bs5,000, and Bs20,000
bills began one month after the intended start date. Private and
Mexico's central bank raised interest rates on 9 February by public banks started to deliver the new bills gradually and in
half a percentage point, in line with economists expectations, small amounts, which many consider not to be sufficient
after a jump in inflation due to a double-digit gasoline price hike because of the rapid rise in prices in Venezuela.
and a weak exchange rate. The overnight interest rate target is
now at 6.25%. Demand for most unessential goods, remains minimal, sources
said, as the population worries about obtaining food, medicines
The increase comes amid growing uncertainty hitting the peso, and other daily necessities amid continuing shortages of
driven by Donald Trumps election and higher interest rates in essential products. Many Venezuelans are crossing the border
the US. US President Donald Trumps pledge to revise the North to Colombia and Brazil to obtain food, and many are staying in
American Free Trade Agreement has caused serious anxiety in neighbouring countries.
Mexico as it sends 80% of its exports to the US market.
In 2016, Venezuela ranked number one in the annual Misery
Last month, central bank chief Agustin Carstens said the impact Index published by the Cato Institute, with consumer prices
on inflation from the gasoline price hike will be transitory and being the major contributing factor.
he said that policymakers could hurt the economy if they
overreact. The central bank raised rates five times last year, The government is importing basic foods, such as sugar, flour,
lifting borrowing costs by a cumulative 250 basis points as the milk, and household items, such as toilet paper, from Colombia
peso slid to successive lows. and Brazil, local sources said. The government sells the
imported products in popular markets in Venezuela at high
prices corresponding to the parallel currency exchange rate, the
sources said. However, prices of scarce goods produced in
Mexico's producer price index (PPI) rose by 2.08% in January
Venezuela continue to be regulated and are offered at low,
month on month, the state statistical agency INEGI said on 9
government controlled prices.
February. Year on year, it rose 0.87%, according to the agency.
The figures exclude petroleum. In addition to all these troubles, Venezuela has one of the
highest crime rates in the world.
By sector, producer prices for industrial chemicals rose by 4.5%
month on month, and were up by 18.56% year on year, INEGI Several currency exchanges, the lack of foreign currency to pay
said. Plastic and rubber products rose by 2.76% month on for imports, and the strong devaluation of the parallel-market
month, and were up by 11.03% year on year, the agency said. currency continue to distort the countrys troubled economy.
Petroleum products were up by 14.24% month on month, and
up year on year at 39.91%, INEGI said.

Shipping
Mexican domestic automobile production in January The following caustic soda solution fixtures in liquid metric
reached 278,542 vehicle units, an increase of 4.1% over January tonnes (lmt) were noted for February and January:
2016, the Mexican Automakers Association (AMIA) and Mexican
Auto Distributors Association (AMDA) said on 9 February. 20,000 lmt, USG/Aughinish, 10-14 February

Exports in January were down by 0.7% year on year at 211,682 18,000 lmt, Maceio/Greece, 20-25 January, $40/tonne
units, the associations said. Sales to the public were higher,
rising 3% in January to 123,260 units, AMIA said.

Overseas markets

Mexican domestic automobile production inDecember In Asia , caustic soda prices were stable in the northeast and
reached 242,495 vehicle units, an increase of 8.8% over last southeast regions as much of the March-loading discussion had
year, the Mexican Automakers Association (AMIA) and Mexican been concluded, while discussions for April-loading has not fully
Auto Distributors Association (AMDA) said. started yet. Turnarounds reduced Japanese and South Korean
exports, and Chinese exports were limited on better netbacks
Exports in December were also higher, up by 4.8% year on year for domestic sales. A new round of environmental inspections
at 216,645 units, the associations said. Accumulated production could impact caustic soda production in China.
for 2016 was at 3,465,615 units, up by 2% from last years
cumulative production of 3,399,076 units, AMIA said. Sales to In Europe , the caustic soda market was unchanged amid
the public were sharply higher, jumping 19.9% in December to balanced-to-tight supply, despite imports from Iran. Monthly
192,567 units, AMIA said. contracts were settled with rollovers for central and eastern
Europe and for the southern markets in France and Italy. Spot
prices rolled over this week. Sources noted mixed views about
the supply outlook for the second quarter, as some European
Venezuela plants were restarting while others will be on planned
shutdowns in the near future.
Prices in Venezuela remain stable in the local bolivar (Bs)
currency, but may vary in US dollars depending on fluctuations
in the exchange rate.

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NYMEX - The number of new houses for sale at end-January was
estimated at 265,000, a 5.7 months supply.

January US existing homes sales rose 3.3% from December

- January 2017 sales rose 3.8% from January 2016.

- The median existing-home price was $228,900, up by 7.1%


from January 2016.

- Housing inventory at end-January rose 2.4% from December


to 1.69m existing homes available for sale, but is still 7.1% lower
than a year ago.

January housing starts fall 2.6% from December

- US privately owned housing starts in January were up 10.5%


from January 2016.

- Januarys single-family housing starts were at 823,000, up 1.9%


from December.

NYMEX WTI crude futures drifted lower on pre-weekend - January rate for units in buildings with five units or more was
selling while factoring in the build in crude oil inventories for 421,000.
the seventh consecutive week revealed by the EIA stats on
Thursday. The Baker Hughes drilling rigs report showing
producers adding rigs for the sixth consecutive week failed to
have an impact on prices.

Week on week WTI increased by 1.1%.

Front-Month Contract
US$/bbl 3 Feb 10 Feb 17 Feb 24 Feb
WTI 53.83 53.86 53.40 53.99
ICE Brent 56.81 56.70 55.81 55.99

NYMEX natural gas futures edged up on 24 February, a day


after the US governments weekly storage report showed a
slightly higher-than-expected draw down in inventories.

Front-Month Contract
$/MMBtu 3 Feb 10 Feb 17 Feb 24 Feb
Natural
3.063 3.034 2.834 2.627
Gas


Economic news
US auto sales
See the Dashboard for more detailed information under
Related News US Sales of New Autos
2017-Jan 2016-Jan YTD 2017 YTD 2016
January sales of new single-family houses rose 3.7% from Passenger
427,596 487,235 427,596 487,235
Cars
December
Light Trucks 715,953 677,137 715,953 677,137
- January 2017 sales rose 5.5% from January 2016. Total 1,143,549 1,164,372 1,143,549 1,164,372

- The median new-home price in January was $312,900. Source: AutoData

- The average sales price in January was $360,900.

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US election
The election of Donald Trump as president of the worlds
largest economy has major implications for global trade. ICIS
has followed the US election and is providing coverage that
includes news, insight and analysis. See the following page for
the latest news: http://bitly.com/2fyASxF

ICIS Chemicals Outlook 2017


IPEX

A Trump presidency, Brexit and the Chinese governments


stricter environmental policies these are just some of the
major developments that pose uncertainty to the global

petrochemicals market. What will happen next? Examine how


The ICIS Petrochemical Index (IPEX) rose by 9.4% in January these changing market conditions have impacted global
on sharply higher petrochemical and polymer prices, which chemical markets, with expert analysis of the market outlook
climbed on the back of tighter supply. for 2017. Download your copies of the Americas, Asia and
Europe outlooks here: http://bit.ly/2k409Ef
Published at the beginning of each month, the index provides
an indicator of the average change in global petrochemical
prices. For more on the IPEX in January, please go to

http://bit.ly/2l0mGSS
Note to subscribers: ICIS reports are based on information

gathered from a wide range of sources. If you would like to


have your views reflected in this report, please contact the
Market news
editor by email at ronald.coifman@icis.com or +1-713-525-
Chemical prices are skyrocketing globally on availability issues, 2639.
with Asia demand pulling product from global sources on

restricted domestic and regional production availability.

Few had expected much in the way of chemicals demand
growth this year, but it has so far helped drive the ICIS
Petrochemical Index (IPEX), an indicator of the average change
in global petrochemical prices, to levels not seen since 2014.

To read the full story, please go to http://bit.ly/2lqnh0q


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