Mexico Pemex increases February PE prices

HOUSTON (ICIS)–State-owned Pemex has begun a round of price increase initiatives in Mexico averaging more than 5% combining all grades, market sources said on Thursday.

The increase for low-density polyethylene (LDPE) amounts to 5.5%, while the rise for high-density polyethylene (HDPE) is 6.0%. The price of HDPE injection material went up by only 5.0%. Linear low-density grades had the smallest increase at 4.0%.

In recent comparisons with other suppliers, Pemex has become the high-cost supplier in Mexico, after a long tradition of being the low-cost alternative.

The reason behind the change in price philosophy resides in the supply shortages the company is having since its shortages of ethane started.

Compliance with their ethane supply contract for Braskem Idesa has left Pemex short of ethane to feed its crackers. This, in turn, forces the stoppage of its PE plants, which take turns to produce PE resins.

Of late, Pemex has had partial production of LDPE and full production of LLDPE, in detriment of HDPE production at the HDPE plants. This rotation in production has been in play for several months.

The Pemex problems have been a bonanza for Braskem Idesa, which is aggressively trying to gain market share in Mexico, and even competing on price with imports from the US Gulf.

LDPE prices in Mexico are in the range of $1,389-1,477/tonne, while LLDPE and HDPE prices at $1,213-1,257/tonne, as assessed by ICIS.

Material from all suppliers in Mexico is more expensive in February, and the trend could continue in March, considering that US producers have already announced a 6 cents/lb hike for that month.

Buyers are likely to resist the March increases, but the outcome will depend on their availability of viable alternatives.