Mexichem withdraws from VCM joint venture

By Stephen Downer
Correspondent

Published: December 3, 2012 6:00 am ET

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Mexico’s plastics industry association, Anipac, has reacted with dismay to the news that Mexichem has withdrawn from a proposed $556 million vinyl chloride monomer-producing joint venture with state oil company Petróleos Mexicanos (Pemex).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 Mexican 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 Nov. 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. The venture was 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 [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 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 said 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.”

De la Tijera, managing director of Grupo Texne of Mexico City and former Anipac president, said, “The significance of this 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.”

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, would approve the project.


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Mexichem withdraws from VCM joint venture

By Stephen Downer
Correspondent

Published: December 3, 2012 6:00 am ET

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