Economic growth remains robust. NG restrictions seem to be easing with milder temperatures in recent days. Ethylene imports have become routine in the last few months. Output at Bahia Blanca is still below normal, but the LDPE unit may restart soon. No shortages have been reported in the first half of August, and supply has improved. Prices slipped in July but appear to be leveling off for August deliveries.

A Braskem cracker at Camacari has reduced monomer output in the past few days. This same unit will undergo a 40-day maintenance operation in the fourth quarter of the year. Unigel’s styrene unit at Camacari is also down. Braskem’s ethanol-based ethylene cracker in Triunfo is expected to come online in late September. Demand from convertors has picked up in August. Exports increased and imports fell in July. However, exports are well below 2009 figures, while imports jumped year-to-year. Naphtha and monomer prices fell for August deliveries, as did resin prices. We expect the downward trend to end soon.

The big news in August was a new law that forbids merchants from giving away free plastic bags to carry purchases in Mexico City. The law went into effect August 18 and allows for the sale of individual bags with some estimates reaching the price of 1 peso, or $0.08, per bag. The impact of this new law is very significant; although, industry groups are appealing for its removal or modification. Regarding the plastic and petrochemical markets, it is supply, and not demand, that has caused a price increase in most products in August, and prices may continue to rise into September. As inventory reposition and price-trend speculation end, sales in August have begun to improve. Transportation logistics through northeastern Mexico is back to normal. On average, prices in the August/September time frame are expected to be higher for most resins. LDPE, PP and PVC prices were experiencing higher prices in early August. Pemex announced a price increase for PEs on August 10. Expectations of yet-lower prices for most resins have disappeared for now. Buyers now believe prices are trending upward and are looking to buy ahead of the hike. Additional maintenance shutdowns are planned for Cangrejera’s LDPE plant during September.

The great gusher of 2010 has been capped. We believe that the oil spill is completely under control. Meanwhile, the economy continues to show little improvement. According to the Bureau of Economic Analysis, the unemployment rate is still at 9.5% on average, but some cities are reporting rates closer to 15%. Housing starts are also low, and local consumer confidence is lower than in June. In company news, PetroLogistics Propylene is in the final stages of starting up an on-purpose propylene plant in Houston, Texas. The plant will convert propane into propylene.

Natural gas prices moved lower in early August. The Henry Hub spot price averaged US$4.35 per million Btu (MMBtu) in early August. At the NYMEX, the price of the futures contract for September delivery at the Henry Hub decreased and settled at US$4.24 per MMBtu. Working gas in underground storage was around 3 trillion cubic feet (Bcf), which was 7% above the 5-year (2005-2009) average. The spot price of West Texas Intermediate (WTI) crude oil averaged US$75.39, or US$13.00 per MMBtu, making light feeds very attractive to the petrochemical industry.