Mexico: growth continues despite strong headwinds

The polyurethane market in Mexico is vibrant, with strong growth in the flexible, automotive, rigid and appliance sectors. Berengere Sim and Simon Robinson interviewed a number of key companies at UTECH Las America 2019

Mexico has been steadily realising its potential over the past generation. NAFTA has been of great help in developing the manufacturing sector there, and wealth is increasing, according to the World Bank.Prosperity has encouraged a 26% increase in population from 102 m in 2000 to 129 m in 2017, the latest year that figures are available for. At the same time, gross national income per head of population increased to $18,210 in 2017 from $10,550 in 2000. This equates to a compound annual income growth of 2.36% for the 17-year period.

Internal Mexican politics can also pose a significant challenge to businesses. Yet, however much these forces work against growth in polyurethane, the market continues to grow.

On its own, Mexico offers an attractive prospect. When its ties to the other North American markets of the US and Canada are added, it becomes irresistible to many investors.

The automotive, furniture, domestic appliance sectors are all oversized for Mexico’s population because it offers a relatively inexpensive way of producing goods for the rest of North America. This has led to a populist backlash over the US border, with President Trump trying to renegotiate the terms of NAFTA. Many are of the view that NAFTA took a long time to negotiate, and it will also take a long time to renegotiate. American companies who have invested in Mexico are opposed to the Trump view.

Gilberto Arriaga, Evonik’s business manager for Mexico, focuses on comfort and insulation products. He estimates the polyurethane market is growing by 5-7% a year.

‘Last year was a very good year in terms of growth, mostly in comfort,’ he said. ‘I have seen very important growth in comfort… I’m not saying that rigid appliances are not important, but they have been more flat in the past six or seven years.’ He said that there was a boom about 10 years ago as manufacturers established plants in Mexico.

Tap in to growth

Juan Trello, general manager at Hennecke Mexico, said that the Mexican market is the most important in Central and South America. ‘The market for Hennecke’s machinery grew 20% in 2018,’ he said. ‘There has been steady growth in the market for the past five years, mostly in the automotive sector, but political uncertainty is causing a slow-down in some areas.’

Luca Ceresa, commercial manager at SAIP, said: ‘The Mexican markets are very much linked to the US market, and there is a good industrial trend in the US. This is why we feel optimistic about the Mexican market. Some of our customers in the US have set up new production lines here.’

He added that they think the market is very interesting, with plenty of growth opportunities. ‘This is why we are here, and why we are thinking about new investment possibilities,’ he said.

Release agent company Concentrol is keen to grow its business in Mexico, and it has expanded five-fold there since 2017. It has operated there for some time, however.

Mexico is one of the countries that we’ve been exporting to for many years but [...] we are more ambitious and have a strategic plan to increase our share,’ said the company’s international commercial manager, Jordi Serrabasa. ‘We have a partner here which distributes our products, and they’re very well located, and they know the clients.’

Huge market

‘We predict it will grow a lot more,’ said Martin Vasquez, vice president for international sales at Esco/Edge Sweets. ‘Mexico is a gateway for South America. It’s a huge market [for our range of machinery]. A challenge here is the culture, in the sense of accepting high-tech products. [There’s a tendency to stick to] manual work, something more simple.’

This did not prevent Esco from presenting its HPX horizontal profiler and CNC blade contour saw at the show. This machine is designed to make 3D cuts that can be used in furniture, bedding and automotive applications for flexible foam. ‘It increases productivity and allows clients to make cuts that they may not have been able to before,’ Vasquez said.

Jorge Lemus, technical director at Productos Eiffel, agrees that the Mexican market is on an upward trajectory. ‘The economy is growing,’ he said. ‘As a company, we have sold almost as much already this year as we had by the end of 2018. For us, business is growing at around 1.5% month-on-month.’

Marco Rigobelo, VP sales at Cannon USA, said that Mexico is an important market for both automotive and refrigeration customers ‘It’s a good opportunity for Cannon in the US and Europe,’ he said. ‘Most customers have lines in Mexico, and sometimes they buy directly from us for use in Mexico.’

Materials and machinery

Evonik’s Arriaga agrees that the automotive market is a good for his company, which is involved in seats and cushions. ‘It is very important for us,’ he said. ‘We supply catalysts and surfactants, but also release agents under the Gorapur brand. We sell these for all applications: cushions, shoes, steering wheels.’ Car seats are the most important application for the company’s release agents, although there is also a small market in shoes.

Karina de Oca, administrative director at Quimica Sagitario, said: ‘We expect a positive panorama, that the industry continues to improve, and the Mexican economy keeps growing,’ she said. ‘The Mexican market is very, very big, with a workforce that is more and more highly qualified.’

Through the gateway

A question on many people’s minds was whether Mexico is a gateway to the north, a gateway to the south, or both. Alejandro Ruis, director at Mexicana de Poliurea, said: ‘We import in English and export in Spanish. I have to speak English to order my primary material. We make the product and then our market is Latin America. We translate all of the technological advances and we sell them in Spanish, to Guatemala, Costa Rica, Cuba, Ecuador and Colombia. Mexico is the gateway, without a doubt.’

Concentrol’s Serrabasa said: ‘I think the Mexican market is mainly for Mexico and a little for Central America. Guatemala and El Salvador are small countries, but they could be interesting given that we have stock in Mexico.’ He added that Concentrol supplies Colombia and Brazil through distributors in those countries who are independent of the Mexican operations.

SD Korea is experiencing growth in several regional South American markets, according to the company’s overseas sales development manager Kim Hyun-Jung. She said that her company handles sales to Colombia and Peru directly. It built markets in Colombia following a visit with KOTRA, an organisation that promotes Korean goods 10 years ago.

Yes, it is a gateway to Central and South America

Guillermo Gill, Fusioni

‘Business in Columbia is growing well, and business in Peru is steady,’ she added. The company serves the Mexican market through a local distributor. In addition, SD is trying to grow its business in Brazil, she said.

Hennecke’s Trello said that the Central American market is much smaller than Mexico’s. ‘But we still have some requests and investments that we want to make,’ he said. ‘The company runs its Mexican operations from two sites in Puebla and Queretaro.’

Application areas

Three application areas for polyurethane stood out among the people we spoke to at UTECH Las Americas: automotive, insulation and refrigeration, and footwear. ‘The footwear market is important,’ said Repi’s technical services manager, Luis Luna.

‘Shoes are a very big market here,’ agreed Concentrol’s Serrabasa. ‘Trump maybe slowed the relationship with the US down a bit, but [overall] it’s very positive. Without a doubt, the US is our biggest market, Mexico is the second, and then we have Brazil and Colombia a bit further behind in automation, but they are interesting too.’

Serrabasa added that Central and South American markets are becoming more environmentally aware. ‘There is now a demand in the market to have more products that are environmentally friendly,’ he said. ‘This affects release agents. Generally, these have been solvent-based, and are now changing to water-based products.’

Best foot forward

Productos Eiffel’s Lemus said that flexible formulations for footwear and rigid formulations for spray foams are growing well. The Mexican shoe-making industry is centred on Leon in the north of the country, and also further south in Guadalajara. Polyether-based systems form the backbone of formulations.

Sehotech was at the event discussing its new fourth-generation blowing agent for polyurethane foams. The company’s Shawn Kang explained: ‘We have developed a blowing agent that is able to meet international regulations. We have recently started supplying the product.’

The blowing agent, trans- 1,2-dichloroethane, is stable in every polyol system, the company says, and completely soluble in most polyols. The clear, colourless liquid has a slightly alcoholic odour. It boils at 26°C at atmospheric pressure, and freezes at -90°C. The material does not have a flash point, and its density is 1,270 kg/m3. In addition, the material, SUF 812ka, has zero ozone depletion potential and zero global warming potential, the company added. Its vapour pressure at 20°C is 840 mm Hg (112 MPa).

Hunter Polyurethane Machinery represents DUT from Korea in the US and Latin America. ‘DUT is gaining a name for dependability in Mexico,’ said Jeffrey Hunter. He believes that the ratio between price and value is attractive to the local Mexican market. ‘People are recognising our one-year unlimited shots guarantee. They like that. Business is growing.’

Fewer VOCs, please

Better environmental performance is becoming increasingly important in the country’s flexible foam industry. Efficiency, environmental improvements and the ability to substitute for products facing long-term bans were some of the key trends outlined by Maurilio Garcia, Momentive’s regional sales manager based in Brazil.

Clients are seeking better efficiency for the chemicals used in the production of polyurethane

Maurilio Garcia, Momentive

‘Clients are seeking better efficiency for the chemicals used in the production of polyurethane to cut costs,’ Garcia said. ‘The other important trend is the decreasing use of volatile products so they are better for the environment, or they’re interested in products that can substitute for solvents like dichloromethane.’

His company was promoting its NIAX L594+ silicone surfactant for flexible foams at UTECH Las Americas. Garcia said the product is likely to appeal to customers in industries such as mattresses and furniture.

In addition, the material is available in closed-cell and open-cell forms, and two different softness levels. The system is the latest in a series of systems products from the raw materials company, which specialises in areas such as anti-scorch additives, Kim said.

Myungryong Choi of the Korean additives company Ziko said that his company’s products are designed for flexible foam, and several companies had visited the company’s stand at the show with an interest in CASE or TPU.

Ziko has a number of new products. ‘The direction we are looking at is environmental protection,’ he said. Key developments are a phenol-free antioxidant and a PUD dispersion stabiliser.

The drive towards low VOC formulations in Latin America also led Stepan to exhibit. Its low VOC polyester polyols for polyurethane coatings were a highlight on the company’s stand.

Jeffrey Janos, research associate in the company’s CASE business, said: ‘Many places around the globe are regulating to reduce the amount of volatile materials that are released into the atmosphere.’ He added that the new polyols for rigid coatings are also low viscosity despite being ultra-high solids materials.

‘Coating manufacturers they don’t want to create a new formula for every region, if you go with these very low VOC type materials, they’re good everywhere,’ Janos said. ‘They are suitable for applications such as airplanes, construction equipment, bridges, structural applications and chemical plants.’