Mexican petrochemicals market to grow well till decade-end on growing demand from automotives

07-Jul-15

The Mexican petrochemicals market earned revenues of US$1.06 bln in 2013 and estimates this to reach US$1.64 bln in 2020, as per Frost and Sullivan. Although the biggest revenue segments for the Mexican petrochemicals market in 2014 were acrylonitrile-butadiene-styrene (ABS) at 381.7 mln and styrene butadiene rubber (SBR) at 332.6 mln, poly butylene terephthalate (PBT) and styrene-butadiene-styrene (SBS) markets are expected to grow at the highest compound annual growth rate (CAGR) from 2014 to 2020, at 11.3% and 8.7% respectively. The main reason for this growth is the steady stream of investments by automotive, electronics, and appliance companies, which are attracted to Mexico's low production costs and strategic geographic location. "While higher vehicle production is the main market driver for the petrochemical market, there is a marked trend toward making vehicles lighter to enhance movement and save fuel," said Frost & Sullivan Energy & Environmental Industry Analyst Mariana Guercia. "This translates to higher demand for plastic materials to replace metal parts, but simultaneously, it also decreases the amount of rubber required per car." The influx of participants, especially from Asia, is intensifying competition in the market and thereby, lowering the average price of resins. The volatility of raw material prices is further constricting profit margins, as it is turning the market toward price-based competition. However, the market has considerable Government backing, which makes it financially viable to do domestic business and keeps the market buoyant in spite of the falling prices. "As Mexico has signed multiple trade agreements with various nations, manufacturers from most countries do not have to pay import taxes," noted Guercia. "The low costs of establishing business stimulate foreign investments, especially in new plants and factories of automotive, appliances and electronics industries, which are the main end users of these resins." Overall, due to the favorable environment created by the Government and the country's advantageous location, the petrochemical market in Mexico is expected to grow at a steady pace.