Plastics production falls in Mexico even as economy grows

By Stephen Downer
Correspondent

Published: February 6, 2014 12:25 pm ET
Updated: February 6, 2014 12:27 pm ET

Related to this story

Topics Mexico

MEXICO CITY – The manufacture of plastics products fell by 4 percent to 4.48 million metric tons in Mexico in 2013 while demand was down 4.8 percent, according to a leading consultant.

It was the first time the industry had failed to keep up with growth in the national economy, which was about 1.5 percent last year, Eduardo de la Tijera Coeto, president of Mexico City plastics sector consulting company Grupo Texne, told Plastics News.

"Never before have I seen growth in the economy while at the same time the plastics market has contracted," he said in a telephone interview. "The reason is that not all (companies) consume plastics. For instance, within the (gross domestic product) are non- manufacturing exports such as oil."

After three years of sustained growth -- the industry grew 5.3 percent in 2012 -- output and demand returned to 2007 levels in 2013, De la Tijera added in a separate series of emailed comments.

He said falling consumption by households, as measured through retail sales indexes, and a drop in manufactured goods exports, with the exception of automotive exports, were the main cause of shrinking demand, along with a slowdown in the construction sector.

"Deceleration in those drivers began as early as April 2012, and in 2013 we saw a further deterioration from the very beginning."

On the positive side, he added, plastics processors were able to maintain their gross margins in spite of high resin prices. "It seems processors learned to live with high resin prices and to transfer cost increases along the value chain."

Referring to 2014's growth prospects, De la Tijera said they hinge primarily on the "three key factors that drive the demand for plastics."

Household spending, he said, may recover "but fiscal reforms will take most of this benefit."

Manufacturing exports are likely to grow despite continued sluggishness in U.S. industrial output.

The home construction industry may be slow to recover as the industry largely depends on the availability of credit.

The Mexican plastics industry could return to growth more quickly, he said, if imports were reduced and if efforts were made to increase exports of plastic products.

"The environmental factor will be also critical in 2014. A large reform of the waste management law is underway. Some things will be good for industry but some may pose high risks. In this process, the plastics industry must walk united and companies must support their associations to face these challenges.

"One more thing: the energy reform is too far away for benefits to be seen in the short term. The effect on petrochemicals will not be felt before 2018-2020."

But he said the possibility of the reform resulting in lower electricity prices for consumers "may bring interesting opportunities to plastics processors as the plastics industry is a major consumer of electricity."


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Plastics production falls in Mexico even as economy grows

By Stephen Downer
Correspondent

Published: February 6, 2014 12:25 pm ET
Updated: February 6, 2014 12:27 pm ET

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