Mexichem withdraws from Pemex vinyl chloride joint venture

By Stephen Downer
Correspondent

Published: November 26, 2012 6:00 am ET

Related to this story

Topics Materials, Mergers & Acquisitions, Suppliers

MEXICO CITY (Nov. 26, 11:40 a.m. ET) — Mexico’s plastics industry association, Anipac, has reacted with dismay to the news that Mexichem has withdrawn from a proposed $556 million vinyl chloride monomer-producing joint venture with state oil company Petróleos Mexicanos (Pemex).

“Without a doubt this is very unfortunate news for the country,” José Anselmo del Cueto Gracia, Anipac’s president told Plastics News by email Nov. 26. He put the total investment at $1 billion and added that the money “that could have been invested in Mexico will go elsewhere.”

Del Cueto lamented the loss of many jobs that would have been created had the project gone ahead, adding: “We hope the new administration (of President Enrique Peña Nieto) will give this project the priority it deserves.”

Mexichem SAB de CV, Latin America’s largest manufacturer of PVC pipe, vinyl resins and compounds, withdrew from the venture November 22 after expressing its exasperation at Pemex’s failure to finalize the deal.

In a filing with the Mexican Stock Exchange, Mexichem, of Tlalnepantla, Mexico, blamed the “constant delays by Pemex” in backing the undertaking, approved by Mexico’s federal antitrust authority (Comisión Federal de Competencia) in October 2011.

It would instead “give priority” to what it described as “its vertical integration plan outside Mexico,” it said. In other words it would invest the money set aside for the project with Pemex in a country other than Mexico.

“Mexichem,” it added, “will continue with its strategy of solid and profitable growth, despite not being able to count on this public-private sector partnership which would modernize our country’s (Mexico’s) petrochemical industry and allow for true growth in a sector which plays such an essential role in Mexico’s economy.”

A Pemex spokesman had no comment on Nov. 23.

But Del Cueto said it was “strategically important” for Mexichem, as Mexico’s main producer of PVC resins, to reduce its costs and increase its production capacity to enable it to offer raw materials to processors at accessible prices.

“From the point of view of the processor, this announcement complicates even more the panorama for obtaining raw materials at competitive prices, which could have meant that the industry no longer lost market share to imported finished products.”

He said that imports of end products made from PVC had had a detrimental effect on sectors such as construction in recent years because competitively priced raw materials were in short supply.

Juan José Suárez Coppel, Pemex’s managing director, told reporters as recently as late September that the proposed joint venture with Mexichem was “very important.” He hoped Pemex’s board of directors would approve it soon.

In July 2011, Mexican consultant Eduardo de la Tijera Coeto said that, if the deal went ahead, “Mexichem will become a very solid company while Pemex’s VCM business, which has been very weak, will become stronger and more profitable thanks to the influence of Mexichem. My impression is that it is a win-win situation for both Mexichem and Pemex.”

“The significance of this,” he added, “is that the vinyl chain in Mexico will be fully integrated. It will very much resemble the way the U.S. vinyl industry is organized.”

Another consultant, Rina Quijada, CEO of market intelligence company IntelliChem Inc, of Houston, Texas, said in a separate interview last year that Pemex used only 50 percent of the installed production capacity of 400,000 tons per year at its VCM plant in Pajaritos, Veracruz state.

But De la Tijera, managing director of Grupo Texne, of Mexico City, pointed out that it was not because of low demand “but because of production limitations. The significance of the (proposed) new deal is that additional capital will be invested to make Pajaritos work.

“That means investment in modernizing some of the facilities, such as some of the furnaces, and improving inter-connection between different units. I’m sure some new engineering design will be needed.”

Mexichem’s withdrawal from the project came nine days before the end of the six-year administration of President Felipe Calderón.

Mexichem executives may have thought there was no guarantee the new government, headed by Peña Nieto, of the opposition PRI party, would approve the project. And, even if the new administration favored a deal, final approval was likely to have taken time.


Comments

Mexichem withdraws from Pemex vinyl chloride joint venture

By Stephen Downer
Correspondent

Published: November 26, 2012 6:00 am ET

Post Your Comments


Back to story


More stories

Image

China's biggest fuel tank maker getting a US foothold

April 23, 2014 4:41 pm ET

The majority owner of China's biggest fuel tank maker is expanding its global automotive footprint with the acquisition of the fuel tank unit of...    More

Image

China's Shide Group, BASF unveil 'revolutionary' all-plastic window profile

April 23, 2014 9:10 pm ET

SHANGHAI — The PVC window profile market in Asia is expected to increase four-fold by 2025, and Chinese building products maker Dalian Shide...    More

Worker dies in fall at Formosa Texas plant

April 23, 2014 4:04 pm ET

A subcontractor died April 22 after falling 25 feet during routine cleaning operations at a Formosa Plastics Corp. USA facility in Point Comfort,...    More

Image

Milliken expanding SC plant for additional PP clarifying agent capacity

April 23, 2014 3:42 pm ET

American chemical company Milliken & Co. has announced plans for a major expansion in capacity for its Millad NX8000 clarifying agent for...    More

Image

CPM Extrusion, ECON launch new line of underwater pelletizers

April 23, 2014 11:25 am ET

CPM Extrusion Group and ECON GmbH unveiled their brand new EUPC line of underwater pelletizers today at ChinaPlas held in Shanghai, China.    More

Market Reports

Market Data Book - Rankings & Lists

A one-stop download of Plastic News' exclusive annual lists and processor rankings containing essential data including sales, employees, end markets, materials and more.
EXCLUSIVE EXCEL FEATURE: full mailing address details for available plant locations.

Learn more

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report provides analysis and discussions of economic and political conditions, market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as strategies being implemented by thermoformed packaging companies. In addition, there are reviews of 25 leading thermoformers in the packaging segment, assessing their growth initiatives and performance metrics over 10 years.

Learn more

Mold Making and Tooling Review and Outlook 2014 North America

This report provides in-depth analysis of the mold and toolmaking market for North America, including discussions of trends, opportunities, threats, the latest developments in production and labor and equipment trends impacting moldmakers.

Learn more

Upcoming Plastics News Events

May 6, 2014 - May 8, 2014Plastics in Medical Devices 2014

May 12, 2014 - May 12, 2014Plastics News Brazil Pharma Summit

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

February 3, 2015 - February 7, 2015Plastics News Executive Forum 2015

More Events