"I predict very interesting times ahead for us in this industry; there are going to be fewer players and those remaining are going to transform the industry in a way we have never seen before."
How has your business evolved over the last year?
Today, Andino Holdings has a presence in the US, Peru, Ecuador, Colombia and Mexico, and we are opening a company in Trinidad which was postponed due to the pandemic. We continue to concentrate on a few commodity products where we are very strong, like methanol and sulfuric acid, and more recently we have expanded into ethanol and caustic soda. In Mexico we are seeking to expand our terminal in Tuxpan beyond the handling of easy-chems to also include fuels, primarily diesel and jet fuel. This will not be a large-scale facility but will serve smaller customers that wish to retain control over their own logistics. Finally, due to the pandemic our Tuxpan terminal is particularly attractive today because of the influx of alcohol for the production of much needed hand sanitizer. Given our marine facility is within trucking distance of the Mexico City area, we provide excellent logistical alternatives to those of rail and truck from the US.
Given our quickness to react and flexibility to repurpose our logistical assets, we did not see such a downturn as those distributors caught with large inventories destined to adversely impacted sectors. Though in some areas we saw as much as a 50% reduction in volumes, our contingency plans were executed quickly so as not to furlough a single person from our staff or default on any of our suppliers or customers.
How is your Tuxpan terminal in Mexico adapting to new market trends, especially considering Pemex’s inability to supply enough feedstock to the industry?
In Tuxpan we have a tank capacity of around 15,000 tons, but now we are able to discharge from barge or vessel directly into tank trucks, so the throughput volume per month is much more than the nameplate tank capacity would indicate. Besides, we also have had customers asking us to store isotainers of specialized products in our facility. Even if the whole Covid crisis has alleviated a bit the logistics congestion we saw during 2019, we still foresee a continuous deterioration of Pemex’s ability to supply the market. The question is what the situation will be when we come out of this crisis. My first thought is that initially Mexico will not be importing as much as it did before Covid, but this is a very large country so if things pick up, volumes will rapidly grow. However, in the interim of all the uncertainty we predict current players will have exited some key markets, leaving more opportunities for Andino to grow its Andikem model (transparent chemical fulfillment services). As they say in Spanish, ‘aguas turbias, buena pesca’.
Could you provide some details about your business in the other Latin American countries?
Peru is primarily a mining market for us. About 70% of mining operators had to shut down during Q2 2020 but as of today, most operations have restarted, though not close to pre-pandemic levels. We deliver a lot of sulfuric acid, given we represent the largest local producer (Southern Copper). We are also a major player in the methanol market, thanks to our years-long relationship with MHTL / Southern Chemical. Other products include methyl isobutyl carbinol (MIBC) which is used for frothing in the flotation process, glycerin and products for the industrial markets.
Colombia is primarily a green energy play for us; as we represent the world’s second largest methanol producer most of our focus is on serving the biodiesel industry. Obviously, volumes this year continue to be affected by the severe decrease in road transportation. Since last year we started importing caustic soda for soaps and detergents, where we have seen quite a stable demand.
In Ecuador we rely on the shrimp farming industry, where we maintain rolling inventories of aqua-nutrients and yield enhancers. We had diversification plans to start the year but were put on hold for obvious reasons.
You have often defended that digitalization will completely transform the chemical distribution business. Has the pandemic accelerated this trend?
It will not be long before the Amazons and Alibabas of the world will push into this industry. The problem, of course, is the delivery and logistics aspect. This business is not as simple as procuring and sending a package of paper goods. At Andino we are already testing our e-platform where customers can order products online and suppliers can decide which products they sell to whom and at what price. We know others are rolling out similar platforms, but at the end of this process the winners will be those who have the creative minds to put together and manage the door-to-door logistics capabilities to fulfill the orders generated from whichever platform the customers choose. We happen to think Andino can provide both the platform and the fulfillment capabilities in the same package. We will rollout first with Mexico, then expand to the other Andikem locations.
What other factors will be important for the company’s success in the future?
I learned from my father that success starts with good people; we will continue to place the right people in the right markets to serve our customers. I predict very interesting times ahead for us in this industry; there are going to be fewer players and those remaining are going to transform the industry in a way we have never seen before. On the sustainability front, we now have an additional ingredient not related to green products or climate change, but directly relating to the aversion of another pandemic. Covid has permanently altered our landscape and we must be at the forefront to protect our people and grow our industry in spite of this imminent risk.