Essential Industry Faces New, Old Challenges

Q: What factors make ANIQ an important part of the Mexican chemical industry and what have been the highlights and challenges for the sector in the past year?

A: An important aspect of ANIQ is its high degree of representation within the industry. We represent over 95 percent of all players that participate in the industry, either as manufacturers, distributors or even logistics managers, among other roles. We are close to having 300 affiliated members after more than 60 years of history in the industry.

Our goal regarding Mexico’s chemical industry is to raise the sector’s profile and highlight its nature as an economic engine and the essence of any number of value chains in other industries of a strategic nature for the country. We are the cornerstone of a majority of productive value chains nationwide. The chemical industry also represents over 2 percent of the country’s total GDP. However, the benchmark that we aspire to reach in this regard, based on our analysis of other developed economies, is between 6 and 7 percent of GDP. These numbers were previously achieved during the industry’s golden era, when it had a greater connection to PEMEX and the NOC’s petrochemical facilities. With this in mind, our objective is to recapture this golden age and reposition ourselves in those terms.

We want to reestablish our industry’s capabilities regarding the development of new technologies and also in terms of employment generation. Our industry represents around 51,000 formal jobs for technicians and skilled workers. For every one of these jobs, we calculate that eight to 14 additional jobs are being generated down the value chains through the supply and manufacturing that we facilitate. That is our multiplier effect. In short, that is the industry’s status, or at least its status pre-COVID-19. The industry’s current total value, which hovers above US$45 billion, makes the sector a solid and historically stable enterprise that, nonetheless, has major challenges to address in its near future. These issues include our inability during the last decade to address our needs through national production of raw materials. We import 75 percent of our annual consumption of raw materials to satisfy the industry’s demand. This problem is compounded each year because that demand continues to grow.

Q: To what degree does ANIQ believe that the government is taking concrete action to address the country’s national chemical production issues? 

A: Sincerely, I would say to a very limited degree so far. The political will and messaging regarding this issue has been present with this government. ANIQ has been in agreement with the major stakeholders and decision-makers within the government, in both its executive and legislative branches, regarding its basic development principles. For example, we also wish to see a strengthened PEMEX and CFE. PEMEX is our industry’s largest client and our largest supplier. We are inextricably linked. Despite these fundamental agreements, the truth is that we do not yet feel that the development of our industry is a priority for this government. If you look at the administration’s flagship projects, such as the Dos Bocas refinery, it is clear that it does have development interests that align with our own but more concrete objectives require action. This applies particularly to the economic and social development of the southern and southeastern regions.

For example, we have proposed that if PEMEX could guarantee a supply of energy in the form of natural gas and raw materials to the Coatzacoalcos area, we could increase the use of our own capacities by as much as 30 points. That area has received annual investments that oscillate between US$2 billion and US$3 billion and yet the use of the available capacity is below 70 percent due to a lack of available energy in the form of natural gas and a lack of raw materials, such as ethane, propylene, ammonia and ethylene oxide. This lack of supply is rare in a global context and yet is it the pervasive issue within the Mexican context. The investment is there and the demand is there.

We might agree with the broader objectives of this government but we are not yet witnessing an effective public investment strategy that we can reap benefits from. Obviously, we understand PEMEX’s financial difficulties but part of its current austerity program is beginning to include the cutting of basic maintenance for the facilities that either supply us what few raw materials we get or are necessary for the imports that are otherwise necessary. We have sent our proposals to both the governments and to other organizations such as CCE, but the communication channels are not always easy to navigate. COVID-19 has accelerated some of the effects of these deficiencies, which makes the act of fixing them even more urgent.

Q: What role is ANIQ playing in helping the industry deal with some of the consequences of COVID-19? 

A: We were given both the privilege and the responsibility of being declared an essential industry throughout the COVID-19 pandemic and the temporary shutdown measures that it entailed. We believe we have met the expectations that were placed on our shoulders as a result of this designation and we complied with all the necessary safety precautions that we were required to adopt. We kept ourselves operational and safe as an industry and, certainly, ANIQ played a role in the effective implementation of all the measures that were necessary for this to be possible. From day one, we had to reinvent our processes to encompass all the necessary lessons learned from similar cases in Europe and Asia, incorporating emerging global best standards and practices. Some segments of the Mexican economy represented higher-than-usual demand for our industry’s products during this period, roughly from March to May 2020, including the health industry, particularly when it came to the manufacturing of sanitizers, home or industrial cleaning products and food packaging. Other productive value chains were halted completely or experienced sharp declines in their activity during these months. This included the construction and automotive sectors and even the oil and gas industry given the situation at PEMEX as the pandemic coincided with the oil price crisis. Since May, these indicators have all normalized or stabilized to a certain degree, which has resulted in a progressive and constant month-to-month improvement of the general economic situation from June to August 2020, with some sectors recovering pre-COVID-19 levels of activity.

The National Chemical Industry Association was formed in 1959 to promote the development and competitiveness of Mexico’s chemical industry. It represents over 95 percent of Mexico’s private chemical production through the affiliation of 258 companies of a variety of sizes and functions.