Mexico’s Pemex, import sellers hike PE prices on tight supply

22 July 2010 22:31  [Source: ICIS news]

HOUSTON (ICIS news)--Pemex Petroquímica - Mexico’s sole polyethylene (PE) producer - and sellers of imported product increased prices of all PE grades effective 21 July, market sources said on Thursday.

Sellers said the increases reflected tight supply of some grades and complicated logistics at the US border. Rail and road transportation was hampered by torrential rains that fell when Hurricane Alex pummelled northern Mexico in late June.

The price hikes were not attributed to raw materials this time, because feedstock prices had declined in the last few weeks, although they appeared to have reached a bottom.

Instead, supply tightened because Pemex had maintenance stops in July that would continue in August, according to market sources. The most affected grade has been low-density PE (LDPE), sources said.

One source in Mexico who personally inspected conditions at the border said commercial traffic from Laredo, Texas, into Mexico was getting closer to normal with each day, but there were additional delays and road closures attributed to drug war violence near the border.

The Pemex increases were modest compared with those of product importers. Low-density PE (LDPE) and high-density PE (HDPE) prices were increased by 3.5%, while the price of LLDPE was increased by 2-3.5%, depending on grade.

The price increase from importers of US product was much steeper, with values surging in the range of 15% to 27% depending on supplier and grade, sources said.

Customarily, resin price changes are not negotiable in Mexico and take effect as soon as announced.

The price increases placed LDPE in the range of 78-86 cents/lb ($1,720-1,896/tonne, €1,342-1,479/tonne) FOT (free on truck), with the high end of the range corresponding to small-volume buyers.

High-density material was selling in the range of 55-62 cents/lb ($1,213-1,367/tonne), although the price for high-volume buyers in July was at about 50 cents/lb FOT, sources said.

Some buyers did not see price increases in July because they bought product early in the month, but they were notified that price increases ranging from 3-5 cents/lb would be applied in August.

Demand was firm in Mexico, spurred by low inventories and fears that new Caribbean tropical storms could form in coming weeks and potentially affect supply.

($1 = €0.78)

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By: George Martin
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