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1、Chemicals PracticeReimagining Mexicos chemical industry The countrys chemical sector could double in size.A shift toward sustainable products,regionalization,and emerging value pools offers an opportunity to fulfill Mexicos potential.October 2022 Bim/Getty ImagesThis article is a collaborative effor
2、t by Pablo Ordorica Lenero,Manuel Prieto,Rafael Scott,Theo Jan Simons,and Yasmine Zhu,representing views from McKinseys Chemicals Practice.In the early 2000s,the Mexican chemical sector supplied most of the local manufacturing industries in the country.In the past two decades,however,Mexico has lagg
3、ed behind a thriving global chemical sector.Mexico has increasingly relied on imports,with the domestic sector facing structural challenges such as feedstock shortages,high energy costs,and limited innovation.Profound shifts are under way that could revive Mexicos chemical industry,including a move
4、toward sustainable products,chemical-chain integration,and new value pools.Mexico is well positioned to capture those industrial shifts given its sizable market,location,robust recycling chain,and renewable resources.In this article,we first review the challenges facing the Mexican chemical industry
5、,its strengths,and global trends that could influence its direction.Then we offer four possible pathways:staying the course,focusing on specialty chemicals and value-added solutions,rejuvenating the industry base,and reimagining the industry.In these pathways,growth will depend on infrastructure dev
6、elopment,the approach to feedstock sourcing,and the ability to innovate and invest at scale.Mexico has the potential to double its chemical production output by 2035,add 4 percent to overall GDP growth over the next decade,benefit the manufacturing sector overall,and ease prices for consumers throug
7、h lower-cost supply.Shorter supply chains could also lead to higher service levels and lower carbon emissions.Capturing the opportunity would require long-term investments that could also deliver sustainable and inclusive growth.The global chemical industry is thriving,but Mexico has lagged behind I
8、n the past decade,global demand for chemicals has risen 3.5 percent per year,faster than global GDP.Emerging markets accounted for most of the growth.China contributed almost$1 trillion to the increase in demand,1 representing half of the global growth.This demand growth,coupled with feedstock and t
9、echnology advantages,allowed the global chemical industry to deliver TSR of more than 10 percent a year since 2010,outperforming the MSCI World Investable Market Index of 8 percent.2 All the industrys subsectorspetrochemicals,specialty chemicals,and agrochemicalshave delivered similar results.During
10、 the same period,several countries have grown their chemical industries significantly.Chinas petrochemical industry has doubled its production to serve the fast-growing domestic market.North America and the Middle East,benefiting from advantaged gas feedstocks,have increased petrochemical output by
11、18 and 30 percent in the past decade,respectively.In contrast,Mexico has not participated in the success story of the global chemical industry.While the countrys demand for chemicals has increased 2percent per year in the past decade,3 domestic production of chemicals has shrunk.In fact,Mexicos chem
12、ical production has declined by about 30 percent in the past decade,mainly because of decreasing petrochemical and agrochemical production(Exhibit 1).As a result,Mexico now relies on significant imports of chemicals to support its local manufacturing industry.Mexicos manufacturing industry is large,
13、representing 20 percent of the countrys GDP.This is higher than those of economies such as Brazil,the 1 Measured as the total value of chemical consumption for a country in 2015 real dollars.For more,see Eren etinkaya,Nathan Liu,Theo Jan Simons,and Jeremy Wallach,“Petrochemicals 2030:Reinventing the
14、 way to win in a changing industry,”McKinsey,February 21,2018.2 Based on a data set of 555 chemical companies,including 244 base-chemical or petrochemical companies and 154 specialty-chemical companies.3 Based on agrochemicals,petrochemicals,resin,specialty chemicals,and volume reported in“Anuario E
15、stadstico de la Industria Qumica Edicin 2022,”Asociacin Nacional de la Industria Quimica(ANIQ),2022.2Reimagining Mexicos chemical industry European Union,India,and the United States,where manufacturing accounts for 12 to 17 percent of GDP(Exhibit2).However,Mexicos dependence on chemical imports is m
16、uch higherabout 28 percent of total demandthan other similar manufacturing-oriented economies such as China and Japan.Several major challenges are holding the industry back:Feedstock shortages.The declining supply of critical feedstocks such as natural gas and ethane,as well as the fall in refining
17、utilization rates(from about 75 percent in 2000 to about 40 percent in 20214),have left many downstream chemical facilities idle.The petrochemical industry has felt the impact:utilization has fallen from 70 percent in 2000 to less than 60 percent in 2021.5 High energy costs.Regulated power prices in
18、 Mexico are higher than they are in countries with established chemical industries such as China and the United States.6 Moreover,industrial companies in Mexico face barriers to accessing Exhibit 1Web Exhibit of The diferent sectors of the chemical industry in Mexico have experienced uneven growth.M
19、exicos chemical consumption split by domestic production and net imports,million tons,2011 volume index to 100Source:Statistics yearbook,Asociacin Nacional de la Industria Quimica(ANIQ),2021PetrochemicalsAgrochemicals and fertilizersSpecialty2011 2013 2015 2017 2019 20212011 2013 2015 2017 2019 2021
20、2011 2013 2015 2017 2019 2021CategoriesC1,C2,C3,C4,aromatics,inorganics,and resinsAdhesives,fbers,and pigmentsAgrochemicals,ammonia,fertilizers,and urea886929713111540%42%+31%Domestic productionNet importsThe different sectors of the chemical industry in Mexico have
21、experienced uneven growth.4“Presentacin inversionistas,”PEMEX,May 2022.5 Analysis across more than 30 Mexican petrochemicals of their production divided by capacity,based on Chemical Market Analytics(CMA)by OPIS,a Dow Jones company.6 Based on countries reported industrial power prices during 2021;Mc
22、Kinsey Power Prices Database.3Reimagining Mexicos chemical industry merchant prices through the Mexican wholesale electricity market(MEM).Historically,MEM prices have been 20 to 35 percent lower7 than the basic power service and are usually competitive with those of countries such as the United Stat
23、es.Lagging infrastructure.Government investment in Mexican infrastructure to enable logistics and energy flows has declined 40percent8 as a percentage of GDP(from 0.5percent of GDP in 2015 to 0.1 percent in 2020).In addition,Mexicos reported gas production has declined,and existing gas import pipeli
24、nes are bottlenecked,which limits the supply available to petrochemical complexes in southern Mexico.In comparison,China invested 5 to 6 percent of GDP in infrastructure in 2020.9 Limited innovation.Mexicos chemical patent applications are equal to about 0.5 percent of those submitted by filers in t
25、he United States,and 15.0 percent of filers in Brazil.A recent drop in research and development funding in the chemical industry has exacerbated the problem(Exhibit 3).Exhibit 2Web Exhibit of Mexico relies heavily on imported chemicals for its manufacturing industry.Countries manufacturing GDP share
26、 vs chemical net-exports ratio1EU net trade represents Austria,Belgium,Denmark,Finland,France,Germany,Iceland,Ireland,Italy,Luxembourg,Malta,Netherlands,Norway,Portugal,Spain,Sweden,Switzerland,and the United Kingdom.2Refects 2022 net-export position and demand for polyethylene(PE),polypropylene(PP)
27、,polystyrene(PS),polyvinyl chloride(PVC),and polyethylene terephthalate(PET).Source:Chemical Market Analytics by Oil Price Information Service(OPIS),a Dow Jones company;S&P Global Market Intelligence%of GDP from manufacturingCommodity plastics net exports as%of demand24020020406010203040Major chemic
28、alsexportersHigh importsdependenceBalanced chemicaltradeUnited StatesMexicoIndiaChinaEU1JapanBrazil100Bubble size=$billions contribution by plastics and chemicals to 2022 GDPMexico relies heavily on imported chemicals for its manufacturing industry.7 Based on 202021 data from Federal Electricity Com
29、mission(CFE)and Centro Nacional de Control de Energa(CENACE).8 According to Center for Economic and Budgetary Research(CIEP)analysis of Secretariat of Finance and Public Credit of Mexico(SHCP)data;for more,see Infraestructura en Mxico:Prioridades y deficiencias del gasto pblico,CIEP,June 2020.9“Infr
30、astructure investment,”OECD,accessed October 20,2022.4Reimagining Mexicos chemical industry Economic and investment uncertainty.Similar to many other countries,Mexico faces uncertain economic growth prospects.The GDP growth rates achieved in 2019 are not forecast to return until 2024,10 while inflat
31、ion rates have reached a ten-year high.Moreover,according to the World Economic Forum and other agencies,Mexico ranks in the third or bottom quartile for most business-enabling benchmarks.11Trends that could spur Mexicos chemical industry Looking forward,Mexico has the opportunity to reignite the gr
32、owth of its chemical industry.Several strengths could accelerate its growth potential:Sizable market.Mexican consumption of chemicals is equivalent to about$40billion of chemical goods,12 with high growth potential supported by demand from a robust manufacturing industry.This puts Mexico among the 1
33、5 largest consumers of petrochemicals globally.Location for nearshoring.Companies based in Mexico could serve Latin American and US Exhibit 3Web Exhibit of Chemicals innovation in Mexico is low compared to other countries.Global chemicals patent applications by location of inventor,201120Source:Worl
34、d Bank;McKinsey analysisPopulation,millionsYearly patent applicationsTechnology focus of chemical patent,201120ChinaUnited StatesJapanEuropeanUnionIndiaBrazilSaudiArabiaMexico1,41,390214,avg111,63397,04381,1449,1803,9571,3519,avg212,63996,21679,34410,7363,5651,332904
35、482Growth%905AdhesivesAgricultureWaterBiochemistryCementCoatingsGlassPetroleumNumber of patents in relevant technology focus,thousands110200Chemicals innovation in Mexico is low compared to other countries.10 Based on various macroeconomic scenarios from the McKinsey Global Ins
36、titute.11 Across 100 legal certainty metrics from Doing Business,Global Innovation Index,Global Peace Index,Heritage Foundation,Legatum Prosperity Index,World Bank,and World Economic Forum.For more,see Klaus Schwab and Saadia Zahidi,The global competitiveness report:Special edition 2020,World Econom
37、ic Forum,2020.12“Anuario Estadstico de la Industria Qumica Edicin 2022,”2022.5Reimagining Mexicos chemical industry markets with favorable trade partnerships and short shipping distances(transport from Mexico is now about 50 percent cheaper and 80percent faster than from Asian countries13).Access to
38、 competitive feedstocks and reserves.Mexico has large natural-gas reserves,such as the Lakach deepwater field.Also,the potential opening of the Dos Bocas refinery,as well as the countrys refinery improvement plan,could generate additional naphtha and propylene by-products that benefit the chemical i
39、ndustry.In addition,Mexicos proximity to the Gulf Coast provides access to ample and economical feedstock imports.An established recycling chain.Mexico has established itself as a significant player in the mechanical recycling of plastics and an early adopter of food-grade recycled polyethylene tere
40、phthalate(rPET).About 15 to 20 percent of total plastics are recycled in Mexico,compared with 10 to 15 percent in Brazil,India,and the United States.Mexicos high recycling rate reflects the fact that 85 percent of waste is collected and can be diverted into recycling streams,with limited volumes bei
41、ng mismanaged or incinerated(Exhibit 4).14 Renewable resources.Mexico has access to some of the worlds most favorable solar-and wind-energy resources.New solar and wind projects today could offer levelized cost of electricity(LCOE)as low as about$30 per megawatt-hour(MWh),15 10 to 20 percent cheaper
42、 than the world average,which puts Exhibit 4Web Exhibit of Mexico has access to a large volume of available plastic-waste feedstock.Plastic waste end-of-life management,1 approximate%,20201Mexico data comes from Informe del Medio Ambiente RSU/ECOCE;Europe refects data from the European Union and the
43、 OECD;other countries plastic-waste data comes from the OECD.2Includes landflled and recycled plastic waste.Source:Advancing sustainable materials management:2018 tables and fgures,US Environmental Protection Agency(EPA),December 2020;ECOCE;European Environment Agency(2018);“Informe de la situacon d
44、el medio ambiente en Mxico,”Government of Mexico,2018;OECD LandflledRecyclingMismanagedIncineratedCapturable plastic waste,2%MexicoUnited StatesEuropeIndiaChina8580505050106570 504025451015205Mexico has access to a large volume of available plastic-waste feedstock.13
45、 Considers inland trucking from Mexico to the United States and ocean freight for China using Freightos database.14 Analysis across Second report of the National Agreement for the New Plastics Economy in Mexico(2o informe del Acuerdo Nacional para la Nueva Economa del Plstico en Mxico ANIPAC in Span
46、ish),ANIPAC,December 2021;“Global plastics outlook:Plastic waste by region and end-of-life fate(edition 2021),”OECD,accessed October 20,2022;“Basic diagnostic for comprehensive waste management,”(“Diagnostico bsico para la gestin integral de los residuos”in Spanish),Secretariat of Environmental and
47、Natural Resources,May 2020.15 Most economical new-build LCOE for solar-photovoltaic and wind energy in 2020,from McKinsey Power Solutions.6Reimagining Mexicos chemical industry Mexico among the top five countries in the world providing low-cost solar energy.16 Labor availability.According to the Eco
48、nomist Intelligence Unit,Mexicos average hourly wage is about 90 percent lower than that of the United States and about 65 percent lower than Chinas.17 The lower wages in the Mexican labor market could give chemical companies an advantage in new-build and operating costs.Mexicos strengths may allow
49、it to capture the following global trends.But the window of opportunity will close within ten years,given the global speed of change and the moves by companies and investors to capture energy transition and sustainability trends.Establishing a 16 Based on McKinsey LCOE model by country.17“Economic i
50、ndicators database,”EIU Viewpoint,Economist Intelligence Unit,accessed October 20,2022.Exhibit 5Sustainable materials are expected to drive global demand growth for polymers.Global polymers demand,202240,million tons per annum11Demand for polymers includes high-density polyethylene(HDPE),linear low-
51、density polyethylene(LLDPE),low-density polyethylene(LDPE),polyethylene(PE),polypropylene(PP),polystyrene(PS),polyvinyl chloride(PVC),and polyethylene terephthalate(PET),and polyester fber;does not include 180 million tons of mixed plastic waste from previous production that is assumed to be reused.
52、Source:McKinsey Chemicals Demand ModelCombinedsustainable materials as%of total demand922025203020352040CAGR202240,%Aggregated 11%per annum growth for sustainable materialsRatio of chemicals growth to GDP growth1.30.91.1Fossil-based9Mechanical6Biodegradable12Biobased22Advanced4
53、7161Sustainable materials are expected to drive global demand growth for polymers.7Reimagining Mexicos chemical industry presence in new value pools could lead to higher margins and attract new investment.Growth in the market for sustainable materials and circular economyGrowth of fossil-based chemi
54、cals is anticipated to slow to 1 percent per year,while materials made from sustainable feedstock18 are forecast to grow about 11 percent per year to 2040,representing more than 30 percent of overall polymer demand by 2040(Exhibit 5).Country regulations and consumer brand commitments,such as the Nat
55、ional Agreement for the New Plastics Economy in Mexico,could spur growth and support further investment.Mexicos position as an early adopter and regional leader in collection rates for PET mechanical recycling offers the potential to expand to other polymers.Investment in high-density polyethylene(H
56、DPE),low-density polyethylene(LDPE),polypropylene(PP),and polystyrene(PS)mechanical-recycling capacity could increase the supply of recycled content destined for both the domestic and export markets,particularly in nonfood applications.Advanced recycling(such as pyrolysis and methanolysis)provides o
57、pportunities to process harder-to-recycle plastics and packaging formats and generate content approved for food contact.Large international producers in Mexico could access recycled feedstock and scale chemical-recycling technologies using their global partnerships and consortiums.The energy transit
58、ions impact on decarbonization Chemicals play a key role in the energy transition.Products made from chemicals have a lower effect on greenhouse-gas emissions compared with materials such as glass and aluminum.19 They also form the basis of materials for electric vehicles,renewable equipment,and gre
59、en buildings.Through its nationally determined contribution(NDC),Mexico has committed to unconditionally reducing emissions by 22 percent below a business-as-usual scenario by 2030.20Mexicos chemical companies could not only improve energy operational efficiency but also consider carbon-neutral or z
60、ero-carbon methods for production(for example,electric crackers,hydrogen furnaces,or ammonia burners)to reduce Scope 1 and 2 emissions,leveraging lower-cost renewable resources in Mexico.Moreover,Mexican chemical players could collaborate with the countrys large customer base for chemicals to replac
61、e high-emission materials(such as aluminum and paper in packaging)with recycled plastics and other low-carbon chemicals to reduce Scope 3 emissions.Nearshoring and regionalization trends could spur new investment Regionalization is gaining momentum.21 North America imports significant volumes of man
62、ufactured goods from Asia but is facing global supply chain issues,increasing labor costs in Asia,volatile logistical costs,and pressure to lower carbon emissions,all of which could accelerate the need for regionalization and nearshoring.In addition,the recently signed US Inflation Reduction Act of
63、2022 creates incentives to localize cleantech manufacturing.This could encourage regionalized production and sourcing of related value chains such as solar-panel materials and inverters.Mexico is the United States third-largest trade partner behind the European Union and China.22 Mexico could be a c
64、andidate for companies looking into nearshoring opportunities,given the countrys free-trade agreements and proximity to the United States.Mexico could also be an attractive destination to serve the US market because of lower labor costs,the absence of tariffs,comparatively 18 Mechanically recycled,a
65、dvanced-recycled,or bio-based materials.19 Climate impact of plastics,McKinsey,July 2022.20 Experts Blog,“Mexico publishes unambitious updated NDC,”blog entry by Carolina Herrera,Natural Resources Defense Council(NRDC),January 7,2021.21 Globalization in transition:The future of trade and value chain
66、s,McKinsey Global Institute,January 2019.22 According to the Office of the US trade representatives:2019 U.S.goods imports from the European Union 27 were$515 billion,followed by China($452 billion)and Mexico($358 billion).8Reimagining Mexicos chemical industry low transportation costs,and shorter t
67、ransit time.We identified ten industries that have high potential for regionalization(Exhibit 6).Mexicos chemical industry,particularly specialties,could take advantage of this megatrend by supplying nearshoring manufacturing industries.Population and nutrition imperativeThe global agriculture indus
68、try is facing disruption on a variety of fronts.Higher agricultural productivity will be necessary as the worlds population grows:forecasts show a 12 percent increase in population by 2030.23 But constrained Exhibit 6Petrochemicals Web Exhibit of Ten industries will likely beneft from regionalizatio
69、n and chemicals.Feasibility of regionalization in North America by industry and chemical usage demandNote:Excludes industries dealing with natural resources,including agriculture,metals,glass and cement,mining,paper,petroleum,and wood industries.1Resource-intensive industries are not included,such a
70、s agriculture,mining,utilities,forestry and paper,and oil and gas.2Economic drivers include shifts already unfolding,demand growth,trade intensity,capital intensity,knowledge intensity,product complexity,and access to resources.3Noneconomic drivers include national security,national competitiveness,
71、self-sufciency,and sustainability.4Percentage of demand in petrochemical and specialty by end industry.5Acrylonitrile butadiene styrene.6Polyethylene terephthalate.Source:McKinsey analysisIndustries1Feasibility of regionalizationEconomic drivers2Noneconomic drivers3Chemical use intensitySpecialty Sa
72、mple chemical usageMedical devicesSemiconductor and electrical componentsComputer and electronicsPharmaceuticalsAutomotiveElectrical equipmentMachinery and equipmentChemicalsMobile and other communication equipmentAerospaceFurnitureFood and beverageApparelTextileABS5 resins for device housing,thermo
73、plasticsSubstrates,encapsulants,membranesPlasticizers for component wiring,display materials Active ingredients,water-soluble chemicals Catalysts,rubberSilicon wafers,photoresistsEngineering plastics,corrosion inhibitors Base chemicals and intermediatesPlating chemicals,etchants Epoxy adhesives,synt
74、hetic lubricantsPigments and colorants,adhesives and sealantsFlavors and fragrances,additives,PET6 bottle resin Polyester fber,nylon,surfactants Flame retardants,bleaching agentsMedianHigh LowHighApplication usage of chemical type,%15LowRegionalizationpotentialTen industries will likely benefit from
75、 regionalization and chemicals.23“2022 revision of world population prospects,”United Nations,accessed October 20,2022.9Reimagining Mexicos chemical industry land availability could tighten food supply:20to 40 percent of land is already degraded,24 and weather volatility is increasing.A growing focu
76、s on organic farming and sustainability would require more efficient use of fertilizers and biofriendly crop protection chemicals.Mexico is among the worlds top 15 food producers.25 However,the countrys demand for agrochemicals has depended mainly on imports,especially fertilizers,where imports repr
77、esent more than 40 percent of total demand.Mexico is well placed to revive its fertilizer industry,serve crucial agriculture states such as Michoacan,and develop biological crop protection products with agtech services.In addition to the trends described above,electrification,biofeedstock growth,dem
78、and reconfiguration in developing regions,and other trends could have a potentially favorable impact on Mexicos chemical industry.Potential growth pathways for Mexicos chemical industryTo assess the prospects of the Mexican chemical industry,we developed four pathways that model the industrys GDP.Th
79、e discussion is grounded in comparisons among these pathways rather than promoting a specific agenda.One pathway,“stay the course,”envisions little or no growth in the industry.The other three project various levels of growth based on levels of infrastructure development,the approach to feedstock so
80、urcing,and the ability to innovate and invest.If the industry stays its course,Mexico will need to import about$40 billion worth of chemicals(more than half of the countrys chemical consumption)by 2035 and incur an extra 5 to 10 percent in logistics and procurement costs,potentially eroding profit m
81、argin potential for downstream industries.This could not only erode the value and competitiveness of existing chemical assets in Mexico but also result in the loss of opportunities to capture value in regionalization and sustainability.Those opportunities could be worth$6 billion to$10 billion per y
82、ear by 2035.On the opposite side of the spectrum of growth,in the“reimagine the industry”pathway,Mexico could almost double the size of its chemical industry and add 4 percent to GDP over the next 15 years.26 That includes$7 billion to$17 billion directly in chemical GDP per year and$20 billion to$3
83、0 billion indirectly in GDP per year in the rest of the economy,as well as another$4 billion to$5 billion per year in GDP increase from capital spending.27 This pathway could also create 40,000 direct chemical manufacturing jobs,90,000 chemical-supporting jobs,and up to 200,000 indirect jobs in 2035
84、.28 Thats equivalent to half of the annual jobs created in Mexico in the past ten years on average.29Exhibit 7 summarizes the economic impact of the four pathways on Mexicos chemical industry.We ordered the pathways based on the scale of investment required.Stay the course Under the current trajecto
85、ry,growth in Mexicos chemical industry would remain almost flat.The 23“2022 revision of world population prospects,”United Nations,accessed October 20,2022.24 Global land outlook,second edition:Land restoration for recovery and resilience,United Nations Convention to Combat Desertification,April 27,
86、2022.25 Based on gross food production value in 2019;see“Value of agricultural production,”FAOSTAT,Food and Agriculture Organization of the United Nations,accessed October 20,2022.26$30 billion to$50 billion a year compared with total Mexican GDP of about$1.2 trillion.27 A total of GDP increases of$
87、60 billion to$75 billion in capital spending over 14 years.28 Chemical-supporting jobs are nonmanufacturing roles in chemical companies,such as human resources;indirect jobs are jobs created by suppliers.29 According to the Instituto Mexicano del Seguro Social(IMSS),526,000 jobs have been created pe
88、r year(on average)in Mexico from 2012 to 2021.10Reimagining Mexicos chemical industry petrochemical sector is expected to contract by 20 to 30 percent from 2021 to 2035,challenging the industrys utilization and competitiveness;petrochemical and resin import volume could grow from about 50 percent to
89、day30 to roughly 55 to 60percent in the same period.On the other hand,underpinned by the growing demand of the manufacturing sector,Mexicos specialty-chemical,downstream-formulation,and conversion segments are expected to continue to expand at 1 to 2 percent a year.In this pathway,total investment w
90、ould be kept at a minimum level Exhibit 7Web Exhibit of There are three growth pathways for capturing the industrys full potential.Note:Additional impact on GDP and jobs might come from the spending of employees in the supply chain and short-term capital expenditures.1Includes petrochemicals,special
91、ties,fertilizers and agrochemicals,industrial gases,paint and inks,soap and detergents,rubber,and converters of plastics products(categories in Nomenclature of Economic Activities NACE codes 20 and 22;basic pharma products excluded).2Direct includes impact coming from the sectors own economic activi
92、ties,and indirect includes impact on sectors frst level of suppliers and sectors subsequent level of suppliers(suppliers of suppliers).Excludes compounder,formulator,and converter jobs.3Considers chemical manufacturing jobs as indicated in INEGIs Monthly Survey of Manufacturing Industry(EMIM).Source
93、:McKinsey Chemical InsightsGDP of Mexicos chemical industry,1$billions per year of GDP value-addYearly average capital expenditures 202235,$billionsIncremental impact on country GDP,2 202235,$billions per year of GDP value-addNew jobs created2 202235,thousandsStay the courseFocus on specialties and
94、value-add productsRejuvenate the baseReimagine the industry+5%+30%+35%+75%1114332Direct chemical manufacturing3Direct supportIndirect supportDirectIndirectDirectIndirectDirectIndirectDirectIndirect20235202356603054762556133
95、1703791204There are three growth pathways for capturing the industrys full potential.30 Total net import of petrochemicals by volume.11Reimagining Mexicos chemical industry of about$20 billion31 over the next 15 years for industry maintenance.Mexicos chemical industry would experience minimal growth
96、,from about$19billion GDP value-add in 2021 to only$19 billion to$22billion by 2035.Focus on specialties and value-added productsIn this growth pathway,the industry could develop capabilities to supply downstream specialty chemicals,formulations,and tailored applications to support domestic manufact
97、uring and export-oriented nearshoring industries,while importing most petrochemicals and intermediates.Building innovation ecosystems,adapting new operating models,and upgrading chemical logistics infrastructure could be the key to success.In this pathway,instead of investing in domestic feedstocks
98、or petrochemical production,Mexicos industry could produce selective specialty chemicals and agrochemicals to serve local and export markets using imported intermediates.Industries with nearshoring potential(such as the automotive,electrical-manufacturing,pharmaceutical and healthcare,and transport
99、industries)would drive local demand for and investment in specialty chemicals,including pigments and colorants,electronic chemicals,active ingredients,and carbon fiber.In addition,Mexico could further expand its chemical formulations and compounding services for the region and be a launchpad for low
100、-carbon chemical-formulation solutions.Mexico could partner with customers to help meet their sustainability-related targets;this could be done by increasing output of recycled content via mechanical-and advanced-recycling pathways and promoting the use of low-carbon-produced chemicals in the manufa
101、cturing of consumer products.This pathway would require a total investment of$30 billion to$40 billion over the next 15 years($2billion to$3 billion per year on average).Building a competitive specialty-chemical sector would require business models different from those employed by commodity chemical
102、 companies.Also,the sector would have to reinvigorate its innovation capabilities.Public and private stakeholders could consider establishing public research institutions to improve research and development capabilities and encourage broader collaboration with universities.One example is the US Nati
103、onal Science Foundations funding for the Centers for Chemical Innovation.Rejuvenate the base In this pathway,Mexico would address challenges within existing infrastructure,maximize utilization,and further strengthen chemical value chains.Feedstock plays a vital role in petrochemicals day-to-day oper
104、ation and production.Securing feedstocks would be a prerequisite to improving existing assets utilization rates and rejuvenating petrochemical assets.Mexico would need to invest significantly in upstream and midstream infrastructure to secure enough feedstock(such as ethane,propane,and naphtha)for t
105、he chemical industry.This includes increasing upstream gas field production,upgrading fractionation facilities for ethane extraction,modernizing existing refineries to improve utilization,and producing more propylene,naphtha,and aromatics.Feedstock availability would help rejuvenate Mexicos existing
106、 ethane crackers in Coatzacoalcos to maximize asset utilization.The announced TuxpanCoatzacoalcos gas pipeline would support existing ammonia plants in Coatzacoalcos and potentially revive fertilizer production.In addition,multiple petrochemical value chains(for example,ethylene oxide and vinyl chlo
107、ride)currently waiting for ethylene availability could restart production and supply further downstream chains.The increase in domestic chemical production would also enable Mexican companies to further invest in specialties production and reduce imports.The rejuvenation pathway would require$45bill
108、ion to$55 billion of investments over the next 15years($3 billion to$4 billion per year on average).The public and private sectors would need to collaborate 31 Based on historical maintenance capital expenditures reported from“Anuario Estadstico de la Industria Qumica Edicin 2022,”2022.12Reimagining
109、 Mexicos chemical industry closely to help encourage production growth.Mexican regional chemical leaders would also need to invest capital and resources to revive their derivative assets and maximize integration with upstream feedstocks.The scale and extent of rejuvenation investment would also depe
110、nd on existing asset conditions and future sustainability requirements;inefficient legacy assets may not be able to compete with sustainable,energy-efficient assets in the future(Exhibit 8).Reimagine the industryIn this pathway,Mexicos chemical industry could maximize its potential through investmen
111、ts in decarbonization and circularity to expand its chemical base;infrastructure to enable ample and economical transport of feedstocks from international markets;and new chemical assets to capture opportunities from future domestic hydrocarbon imbalances.Exhibit 8Web Exhibit of The scale and focus
112、of the investment required will vary by scenario.Cumulative capital expenditure required over the next 15 years,$billions Note:Figures may not sum,because of rounding.1Based on historical average maintenance capital expenditure spend,excluding new major project capital expenditures.Source:McKinsey C
113、hemical InsightsKey changes requiredMaintenance capital expenditures across the industry1Secure feedstocksIncrease upstream gas productionUpgrade or expand fractionation and improve import infrastructureModernize existing refneriesGrow specialties and value-add services Grow presence serving regiona
114、l nearshoring and manufacturing industriesDevelop oferings for other industries such as packaging and personal careIncrease specialties services(eg,compounding and formulations)Support agriculture resiliencyReduce fertilizer imports and grow crop protection Focus on specialties and value-add product
115、sRejuvenate the baseReimagine the industry304045556075Replace imports of petrochemicalsUpgrade or expand cracking capacityImprove polyolefn self-sufciencyIntegrate polyester family value chainGrow inorganics value chain productionExpand aromatics and derivative productionNew oferings in engineering
116、plasticsDevelop sustainability presenceIncrease mechanical and develop advanced recycling capacityDevelop green H2 and ammonia209220937The scale and focus of the investment required will vary by scenario.13Reimagining Mexicos chemical industry To address the feedstock issue,Mexico could c
117、onsider importing low-cost feedstocks from the global market.Mexico is close to two of the worlds lowest-cost oil and gas basins:the Permian Basin and Eagle Ford in the southwestern United States.And Mexicos proximity to the United States means Mexico would pay less for ethane imports to supply its
118、ethane crackers than countries in Asia and elsewhere do.The naphtha and refinery-grade propylene from Mexicos refineries would provide feedstock options for the chemical industry.Mexico could also invest in petrochemicals to integrate existing chemical chains and serve local demands.Value chain inte
119、gration could allow the industry to continuously upgrade the value of hydrocarbons and maximize asset synergies.Mexico has multiple chemical chains with missing intermediates,such as polyester and polyvinyl chloride(PVC)chains.Investing in intermediates and expanding derivatives would help Mexico st
120、rengthen its petrochemical position.In agrochemicals,Mexico could reduce its reliance on fertilizer imports by developing new capacity to serve its major agricultural states in the Pacific coast.For crop protection chemicals,Mexico could explore biological pesticides to reduce the load of synthetic
121、chemicals and promote digital tools to empower farmers in making informed decisions.Finally,developing sustainable products could be a significant differentiator for Mexico in places where sustainability markets are still nascent:Expanding circularity capabilities.Mexico is already a leader in plast
122、ics recycling.It could use its existing recycling ecosystems to enhance the collection of plastic waste necessary for use as feedstock.Incorporating chemical recycling into the mix of production methods to generate recycled material would be necessary to meet domestic brand-driven demand for recycle
123、d content.Expanding recycling production into non-PET plastics and hard-to-recycle applications of PET would also position Mexicos chemical industry to service strong demand in export markets.Decarbonizing the industry with green hydrogen and green ammonia.Mexico has abundant solar and wind resource
124、s(for example,solar in the north and wind in Oaxaca).Mexico could use these resources to become a leader in supplying green hydrogen and green ammonia to help decarbonize the refining and chemical industries.In this pathway,Mexico would need to invest$60 billion to$75 billion in the chemical industr
125、y over the next 15 years($4 billion to$5 billion per year on average).It would be an unprecedented level of investment for Mexico,but countries such as India and Brazil have achieved it in recent decades.32 This investment would require concerted efforts across various stakeholders in the industry;a
126、 robust collaboration mechanism could strengthen long-term ties between industry players and national authorities and encourage investment.Both public and private R&D activities would need to be encouraged to promote investment in specialty chemicals,low-carbon chemicals,and green hydrogenbased prod
127、ucts.Assessing the industrys full potential If Mexico pursued the full range of levers available,the chemical industry could almost double in size,adding another$7 billion to$17 billion per year to the industrys GDP by 2035(Exhibit 9).Should Mexico achieve its full potential,it would become the worl
128、ds tenth-largest chemical industry by 2035,on par with Brazil.For petrochemicals,the sector has the potential to grow$3 billion to$5 billion by serving local markets,reducing import dependence to about 10 percent,and increasing use of existing assets.For specialty chemicals,there is a$4 billion to$6
129、 billion growth opportunity to capture nearshoring trends and target high-demand manufacturing industries.32 India and Brazil spent about$80 billion and$67 billion,respectively,in chemical industry capital expenditure in the past 15 years(200721 in 2015 real dollars);S&P Global Market Intelligence.1
130、4Reimagining Mexicos chemical industry For agrochemicals,Mexico could revamp its fertilizer production and strengthen crop protection solutions,creating a$1 billion to$2billion value-add.For sustainability,Mexico could establish its leadership position in recycling to incorporate a wider variety of
131、waste plastics into its recycling ecosystem and invest in green hydrogen,potentially adding another$1.0 billion to$1.5billion to the chemical industry.The chemical industry in Mexico is at a turning point.Global trends are opening new growth avenues,but much work remains for Mexico to be able to cap
132、ture the opportunity.Exhibit 9Web Exhibit of By pursuing the right investment,Mexicos chemicals industry can capture$7 billion to$17 billion in additional value by 2035.Size of Mexican chemicals industry,$billions,GDP value-add1Includes petrochemicals,plastics and resin in its primary form,and inorg
133、anic chemicals.2Includes fertilizers and crop protection chemicals.3Polyethylene(PE),polypropylene(PP),polystyrene(PS),polyvinyl chloride(PVC),and polyethylene terephthalate(PET).Source:McKinsey Chemical Insights202135Change 202135Full potential2035Stay the course2035719+717Petrochemicals
134、:1 Secure low-cost feedstocks and expand chemical chains to meet 90%of domestic demand 3.05.0Specialty:Capture nearshoring trends to grow specialties targeting high-demand manufacturing industries with value-add services such as tolling and formulation 4.06.0Agrochemical:2 Add new agrochemical facil
135、ities closer to demand hubs with lower cost-to-serve and replace imports1.02.0Sustainability:Mexico assumes global leadership role in production recycled plastics3 with green premium over commodity plastics;green-hydrogen and green-ammonia markets developed1.01.5Compounders,formulators,and converter
136、s:North American demand supports 2%CAGR in end-use conversion for fnal rubber and plastics with chemical imports1.02.5Incremental GDPvalue-add from2021 to 2035,$billionsBy pursuing the right investment,Mexicos chemicals industry can capture$7 billion to$17 billion in additional value by 2035.Scan Do
137、wnload PersonalizeFind more content like this on the McKinsey Insights AppDesigned by McKinsey Global PublishingCopyright 2022 McKinsey&Company.All rights reserved.Pablo Ordorica Lenero is a senior partner in McKinseys Mexico City office,where Rafael Scott is a partner;Manuel Prieto is a partner in
138、the Houston office,where Yasmine Zhu is a consultant;and Theo Jan Simons is a partner in the Cologne office.The authors wish to thank Yuyang Du,Federico Gonzalez,Craig Poeppelman,Andrew Ryba,Sam Samdani,Alexandra Tennant,Matthew Veves,Jeremy Wallach,and Adam Youngman for their contributions to this article.15Reimagining Mexicos chemical industry