"Due to these factors and organic growth, we see a unique opportunity in Mexico and double-digit growth in the next two to three years. The integration of the Air Products acquisition, for example, will bring significant growth to our comfort and insulation business line; including for our polyurethanes business with many players in the automotive industry."
Evonik is celebrating 50 years in Mexico. Could you give us an overview of its manufacturing capabilities and its product portfolio in the country?
Evonik Industries is very well represented in Mexico with more than 20 business lines operating in the country. We operate three business segments globally, which are nutrition and care, performance materials and resource efficiency. Regarding manufacturing capabilities in Mexico, for more than a year now we have been operating a sodium cyanide plant in Coatzacoalcos for the gold and mining industries in a joint-venture between CyPlus, a wholly owned subsidiary of Evonik and Mexican Grupo Idesa.
How important is Mexico to Evonik and what will be the impact of Evonik’s recent acquisitions on its business here?
Evonik actively participates in many significant industries in Mexico such as mining, automotive, coatings and animal proteins among others and sees a growing opportunity with many others, such as health, personal and household care, aerospace, oil and gas. We are currently integrating business units of acquisitions we made in the US market, such as the performance materials division of Air Products and part of the silica business unit of J.M. Huber.
Due to these factors and organic growth, we see a unique opportunity in Mexico and double-digit growth in the next two to three years. The integration of the Air Products acquisition, for example, will bring significant growth to our comfort and insulation business line; including for our polyurethanes business with many players in the automotive industry. We have also just announced the expansion of our molding compounds plant in Arkansas to serve the growing automotive industry in Mexico. Right now, we only produce sodium cyanide in Mexico, but this is just a first step.
Will the capacity of CyPlus and Idesa’s sodium cyanide plant be expanded?
If gold and silver production in Mexico continues to develop positively there will be the opportunity to expand our business. Mexico is an important market in terms of sodium cyanide given that it is a leading producer of gold and silver.
Will the energy reform make Mexico’s feedstock more competitive and what will be the impact of current trade negotiations?
With Mexico’s 45 trade agreements with countries worldwide, it is positioned very well for the future. Regarding NAFTA, my personal opinion is that the outcome will be similar to what is in place now, but we will probably miss the chance to upgrade the agreement. Evonik has more than 30 manufacturing sites in the United States so our Mexican business benefits from NAFTA greatly. In the discussions to upgrade trade agreements with South America and the European Union, as well as in the Trans Pacific Partnership, chemicals play a big role. The agreements will reinforce the investment flow into Mexico and will complement the positive effects of the energy reform eventually.
What would hold Evonik back from expanding its manufacturing footprint in Mexico?
There are no major challenges to this. We are in a good position in Mexico being part of Evonik`s North American Business Platform, due to the proximity to our US factories and we are focusing on optimizing logistics and the whole supply chain from US to Mexico. Our production footprint in Europe also enables us to be very competitive in Mexico. We are also currently focusing on integrating our acquisitions into our Mexican business platform. In the future, if we really go for a local manufacturing site in Mexico, we would need to find the right product to bring to the country in terms of local availability of raw materials and infrastructure and technology, as well as a suitable market.
We will see what happens with the implementation of the energy reform but in the short term there are certain derivatives from petrochemicals which there are not enough of or the supply is not consistent or competitive in Mexico. In terms of energy, Evonik in Mexico is embarking on full solar energy supply for all of our assets in Mexico, which we expect to profit from.
Can you give examples of how your products help clients become more sustainable?
Many of our business lines have been focusing on this. For example, our silica products support the concept of green tires, which reduce fuel consumption significantly. We just launched a joint-venture with DSM for the production of omega-3 fatty acids for the salmon and pet food industries. This is a breakthrough for animal nutrition because, for the first time, it will enable production without using fish oil that puts a strain on the oceans’ resources.
What lies ahead for Evonik in Mexico in 2018?
In 2017 compared with 2016, we achieved more than 20% growth in volumes and above 15% in turnover. Many of our global key accounts are here already or coming to Mexico, we have joined them on their journey and we are now supplying them. We see outstanding growth rates and expansion by our local key accounts as well, especially the ones connected to export markets. Evonik Industries marks its 50th anniversary in Mexico during 2018, and therefore, Evonik Mexico and our more than 130 colleagues here will continue working closely with our customers by offering unique products and services to add significant and sustainable value to their whole operation. We expect consistent growth in the next two years. We must do our homework to absorb and capitalize on this growth. It is a good challenge to have!