Before the energy reform in 2013, the production of basic petrochemicals was reserved to the Mexican state through Pemex. Mexico’s petrochemical production had been in decline for decades after Mexico joined the General Agreement on Tariffs and Trade (GATT) in the early 1990s and then NAFTA in 1994, which meant its market became flooded with petrochemical products from abroad. This not only meant Pemex produced less basic petrochemicals but also that the private sector in Mexico invested less in downstream capacity.
Therefore, the move by Braskem Idesa in June 2016 to open a new 1.05 mt/y integrated polyethylene complex in the state of Veracruz, the outcome of a US$5.2 billion investment, was a cathartic moment for the industry. Nevertheless, Mexico’s landmark energy reforms still have a long way to go before adequate feedstock is available so that Mexican petrochemicals can reach their potential. The volume of petrochemical production fell from around 9.67 million mt/y in 2015 to 8.47 mt/y in 2016, whilst imports grew by 7.8% and exports decreased by 11.9% in the same period. Furthermore, elections scheduled for 2018 risk unraveling current President Enrique Peña Nieto’s ambitious energy reforms if rival candidate Andrés Manuel López Obrador is victorious; the NAFTA trade agreement is under revision and the outcome uncertain; and the petrochemical industry in the USA is undergoing a revival based on shale that is broadening Mexico’s trade deficit in petrochemicals. GBR has met with executives from across the industry and reports their concerns and objectives along with our own analysis of the current state of the industry.