Plastics manufacturing in Mexico will receive a boost from lower energy costs
Over US$ twenty three billion is generated through plastics manufacturing in Mexico each year.
The industry produces approximately four thousand five hundred million metric tons annually. However, as Mexico’s economy continues to grow steadily, the increase in plastics manufacturing in Mexico has not exceeded four and one half percent in any of the past several years, prompting industry leaders to be concerned about the future of the country’s industry. However, Mexico’s recent energy reform overhaul has provided an indirect benefit to this manufacturing sector, raising hopes related to the Mexican plastic industry’s prospects, as the reform legislation may result in a new growth rate average of at least six percent annually by next year.
Economists, industry leaders, and government officials have noted that the recently enacted energy reforms will lower energy costs, thus reducing the cost of inputs and raw materials for those involved in plastics manufacturing in Mexico by twenty percent over the next five years. The nation is the tenth largest producer of plastics in the world, but to remain competitive, the more than four thousand five hundred Mexican companies that are engaged in plastics production must have access to advantageously priced raw materials. Reduced energy costs will bring about this outcome, which will directly impact the cost to bring materials to consumers in the world plastics market.
Mexico possesses a large concentration of the world’s shale gas reserves. These can be used to create petrochemicals, which are used in the manufacture of plastic. Combining basic petrochemicals, and other chemical, inputs creates intermediate petrochemicals such as methane-based resins for rubbers, lubricants, and polyurethanes, which are in turn used as inputs for plastic production. In addition to the boost afforded by reduced electricity rates, the plastics industry will benefit from a more aggressive plan to exploit Mexico’s extensive shale gas potential, thus reducing the costs of inputs used in plastics manufacturing in Mexico even further.
A third impacting factor that may contribute to driving down the cost of materials for the production of plastic in Mexico is a better recycling infrastructure. Exploiting biofuels could significantly decrease energy costs, and thus the cost of raw materials. Mexico is currently considering the investment of a billion dollars to upgrade their recycling capacity to bring it more into line with that of European countries such as Germany that are recognized for their prolific use of recycled materials. While this third factor is not yet a reality, it is clear that the issue of energy is paramount in the effort to reduce costs for the plastics industry, which is needed increase competitiveness. Energy reform will prove itself to be a key contributing factor to energizing companies that are engaged in plastics manufacturing in Mexico.