Polymer imports in Mexico challenged by currency issues

18-Aug-15

The Mexican peso's continued instability specially vs the strong US dollar, has caused issues for those attempting to trade polymers within the country, as per market sources in Platts "The peso continues to affect the volatility and confidence of the buyers who do not intend to commit to long-term buying," a Mexico-based polymer distributor said Monday The distributor source said a weakened peso -- the exchange has hovered around 16-16.50 pesos to $1 -- has hurt the polymer business. Buying from the US in dollars at current price levels would result in a loss for distributors who then turn around and sell to customers in Mexico using local currency. A source with state-owned Pemex said the devaluation had clouded the industry with uncertainty as participants were afraid to be in debt in US dollars "The good news is that the Bank of Mexico has intervened and injected US$200 miln to avoid a major slide," the source said. The decline comes as global polymer prices have fallen sharply on weak demand and high inventories -- especially from the US, which Mexico counts on as a key trade partner because of its proximity and rail car system for moving resin into Mexico. Producing polypropylene in Mexico could also bring less attractive margins, sources said, noting that feedstock propylene is often bought based on US spot pricing levels and then converted to resin, which is then sold domestically or exported to Central America