Latin American petrochemical importers expect lower US volumes

Latin American petrochemical importers are keeping an eye on US President-elect Donald Trump's tariff plans, but participants already expect more pressure on commodity import prices in 2025 due to the appreciation of the dollar against regional currencies.

The new year is also expected to bring intensified trade relations with China as Latin American governments look at tariffs of their own amid increasing trade competition.

Following Trump's election win, the US dollar rose against other currencies due to expectations of tariffs and other measures to stimulate the country's economy. In addition to tariffs, uncertainties over interest rate cuts by the Federal Reserve in 2025 could further strengthen the dollar and make imports more expensive.

"Everyone knows that a higher exchange rate inhibits imports," André Passos, president of Abiquim, the Brazilian Chemical Industry Association, said in an interview with S&P Global Commodity Insights.

"This would further pressure the unfortunate reality of the Brazilian chemical industry," he said, noting a dependence on imported raw materials. "We do not set prices in Brazil; we take international prices. We are price takers, not price makers."

The US was the main supplier of polyethylene to Brazil throughout 2024, providing about 72% of the country's inflows from January to November, according to data from Brazil's Ministry of Development and Trade. US import volumes were up 67% on the year.

In the Mexican recycled PET market, the strengthening of the dollar has already benefited trade flows for certain commodities being exported to the US.

"With the dollar uptick and higher recycled PET flake prices, it is now feasible for us to export into the US," a Mexico based seller said.

The expectation of a stronger domestic market in the US brings another expectation for Latin America.

"A heated economy pulls internal market prices. Is it worth exporting?" a Brazilian polyethylene trader said. "We may see a decrease in volumes to Latin America," he said, considering higher domestic consumption in US local markets.

A local PVC trader said, "the one who loses is the Brazilian importer, who will not have US supply at such low prices."

West Coast South America (WCSA) PVC prices fell over 21% from $930/mt CFR WCSA on July 3 to $730/mt on Nov. 20 shadowing FAS Houston prices, which also showed 22% volatility over the same period. Brazil, on the other hand, suffered less volatility in prices during the year, with the highest point at $940/mt and lowest at $820/mt, following Asian markets movements. Trends for 2025 are expected to continue with WCSA markets following the US and Brazil taking price direction from China and Southeast Asia markets.

Competition between US and China

The relationship between the US and China is also expected to have an impact in 2025. Implementation of US tariffs on Chinese-made products could force China to seek out other import markets like South America.

"Certainly, what we will see is a difficulty for Chinese products to penetrate the US market," said Passos. "If this happens, it is likely that we will see increased demand for Chinese products in the Brazilian market."

As a result, "the Americans, to compete with the Chinese product, drives prices lower to penetrate markets like Brazil," said Passos, noting it would effectively create a price war in Brazil.

Some participants expect to see more competitive offers from China during the first half of 2025, while others said higher fright rates, longer delivery times and a more limited range of available products would keep China from gaining market share in Latin America.

Influence on other countries

Trump has said on a social media he would impose a 25% tariff to all products coming from Canada and Mexico to the US, and an extra 10% on Chinese goods. How those tariffs would impact markets has created much uncertainty in the region and could bring a backlash.

Higher interest rates in the US, combined with elevated import tariffs, could lead to a global response against the Trump Administration.

"The US under Trump would want to push both Canada and Mexico to the same level of elevated import tariffs," said Satyam Panday, chief economist at S&P Global Ratings. "If we also consider a scenario of lower growth and higher inflation in the US, the Federal Reserve and the rest of the world have to respond."

In Brazil there are already discussions to raise the antidumping tariff against US PVC, currently at 8.2%. In addition, on Nov. 14, the Brazilian government initiated a dumping investigation against the US and Canada on polyethylene imports. Several market sources believe antidumping duties against US and Canada PE imports is now certain, just a matter of when and how much the duties will be.

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Chemical Trends H1 2025
This feature is part of our bi-annual report analyzing the biggest themes and trends that will dominate chemicals markets in the year ahead. Explore more features below, or to read articles looking at the year ahead for a wider range of chemical markets, visit Platts Connect

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