Mexico’s petchems supply flowing despite Altamira disruption, but industry crisis could continue

SAO PAULO (ICIS)–The drought affecting the Altamira petrochemicals hub in Mexico’s state of Tamaulipas is not yet affecting the supply of chemicals, but the water restrictions for industrial players could continue, sources said this week.

The modest rainfall in the past few days has not resulted in any great improvement in water supplies, with households still suffering water restrictions. Supplies to industrial players will only resume when supply for households is normalized.

Earlier this week, Mexico’s chemicals producer Alpek declared force majeure on supply of purified terephthalic acid (PTA) out of Altamira. The producer has the capacity to produce 1 million tonnes/year in two plants at the petrochemicals hub.

Sources in the US PTA and polyethylene terephthalate (PET) markets have said they fear disruptions to supply if the crisis in Altamira continues.

In May, the critical situation affecting water supply to residents in the area prompted authorities to halve water supply to industrial players, with many of them declaring force majeures thereafter.

This week, a well-connected source in the Mexican petrochemicals industry limited the current crisis, for now, to production issues, with supplies of all materials still flowing.

“What we are hearing in the market is not about shortages – for now, it is limited to a production problem,” the source said.

“A lot of US product also comes to Mexico, so for now there is no supply problem as such. However, everything will depend on how long it takes for this to be resolved so industry can return to normal production.”

Weather patterns developing normally, Mexico’s east coast should be entering the rainy and hurricane season soon, which could start to ease Altamira’s drought.

However, with residents in the area still suffering water restrictions in their homes, normalization in water supplies to industrial players should still take some time.

The light rain in the past few days, however, may already be starting to show positive effects.

Last week, local media in Altamira reported how the Champayan lagoon, west of the city and a natural spot very much loved by the locals, had dried up overnight.

On 11 June, residents woke up to a lagoon with water again.

ELECTIONS STOLE FOCUS FROM DROUGHT
Mexico concluded on 2 June an electoral process which kept political parties’ focus away from the drought developing in Tamaulipas, said the source in Mexican petrochemicals.

“Altamira is located in an area which doesn’t lack water. The drought became a perfect storm on the back of the authorities’ poor response. In an election year, instead of investing resources to reverse the drought situation months ago, those resources went to the electoral campaigns,” it said.

“Having so much water in the area, they could have installed pumps in certain rivers to transfer water to other rivers, which could have solved the situation preventively. They are pumping water now, but now turned out to be too late for industrial players. In addition to the drought, the campaign had the greatest impact in the current crisis.”

Last week, the government of Tamaulipas ordered that tanker trucks be sent to the south of the state from other municipalities not affected as harshly by the drought, as well as from other Mexican states.

The trucks will not sort out the dire situation at industrial parks, however, because the water is being deployed to households only.

The latest report by the public body in Mexico monitoring the drought, published on 5 June and covering up to 31 May, continued showing the state of Tamaulipas in the Gulf Coast as one of the hot spots suffering the current crisis.

MEXICO DROUGHT MONITOR
Tamaulipas (east) suffers ‘exceptional drought’ amid a nationwide crisis

Color scale: Yellow, abnormally dry; light orange, moderate drought; orange, severe drought; red, extreme drought; brown, exceptional drought
Source: Mexico’s National Water Commission, part of the National Meteorological Service. See more here, in Spanish

Front page picture: The Port of Altamira, Mexico’s state of Tamaulipas
Source: Altamira Municipality

Focus article by Jonathan Lopez