21 March 2013 16:02 [Source: ICIS news]
HOUSTON (ICIS)--Mexico’s sole polyethylene (PE) producer Pemex reduced the price of all grades of PE by up to 5% effective 19 March, distribution sources said on Thursday.
The maximum price reduction was applied to high density polyethylene (HDPE) grades, injection and blow moulding grades.
For low density polyethylene (LDPE), the reduction was in the range of 4.5-5.0%.
Linear low density polyethylene (LLDPE) for extrusion was reduced by 4.25%, while the price for rotomoulding material was reduced by 3.7%.
The reasons for the reduction are the same ones that drove a 5% reduction in February: a noticeable decline in demand and the perception of high inventories across the whole chain.
This reduction was predictable, because slow demand was the most frequently heard complaint during Mexico’s Plastimagen trade show that ended on 15 March.
Distributors reported a decline of about 20-25% in their sales, and could not find much of an explanation for it.
The local producer does not have much capacity to build up inventories, and exports have not provided much relief in the past few weeks.
The Easter holiday is expected to slow down demand even further.
It remains to be seen whether this price reduction will be the right medicine to revive demand.
Import prices have not officially declined, but there are signals indicating that sellers would be willing to show some flexibility on pricing towards the end of March.
The Pemex reduction will certainly add pressure for importers to make a similar move.
Prior to this March reduction, Mexico’s domestic LDPE prices were at $1,608-1,729/tonne (€1,238-1,331/tonne) FOT (free on truck), while LLDPE prices were in the range of $1,447-1,713/tonne. HDPE blow moulding prices were at $1,552-1,636/tonne FOT, according to ICIS data.
Pemex is the only producer of PE products in Mexico. A Braskem-Idesa joint venture is expected to start production at the end of 2015.
$1 = €0.77
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