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Mexico Drought Impacts Chemical Plants, Manufacturing

There are concerns that industries like medical device, electronics and automotive may be impacted.

Drought
iStock.com/piyaset

Amid one of the most severe droughts in Mexicoโ€™s recorded history, several parts of southern Tamaulipas state, which borders the U.S., have been impacted resulting in limited or halted manufacturing. Due to the intense drought and disrupted operations, various chemical and petrochemical plants in the state have been shuttered. 

Everstream Analytics is tracking how the drought is disrupting manufacturing operations across chemical and petrochemical plants in the state:

Locations of drought-affected companies in Tamaulipas, Mexico.Locations of drought-affected companies in Tamaulipas, Mexico.Everstream Analytics

  • The state governor announced a state of emergency on June 5 in the most affected municipalities of Altamira, Madero and Tampico, where both residential and industrial water supply is now limited.
  • Alongside the emergency declaration, the governor has begun negotiations with industries across the state to limit water usage to preserve drinking water for residents. In some extreme cases, like in Altamira on May 22, authorities halted water supplies to at least 74 industrial sites and eight petrochemical plants for this reason.
  • As a result of the limited water supply and the associated restrictions, various industries in Tamaulipas were forced to partially or fully shut down operations. At least seven companies, including petrochemical heavyweights such as INEOS and Sabic are reportedly affected in some way, ranging from operating at limited capacity to declaring force majeure on all operations.
  • Facility impacts have ranged in severity dictated by differences in water reserves, as all facilities in the affected area are vulnerable to government restrictions amid rapidly depleting stocks of water supply.
  • Some companies like Petroleos Mexicanos (PEMEX) have reported operating with limited water resources at its Madero Refinery but have not yet confirmed production disruptions as a result. The latter indicates that there may still be new production impacts to come as companies like Pemex grapple with the emerging consequences of the drought crisis.
  • The industrial shutdowns could end up affecting U.S. petrochemical production as well as Tamaulipas is home to key suppliers to several downstream production processes, including polyethylene terephthalate (PET).
  • There are also concerns that other industries like medical device, electronics and automotive manufacturing may eventually be impacted due to the concentration of suppliers in Tamaulipas.
  • As water is used throughout the manufacturing processes for these components, like in production-line cooling, it is likely only a matter of time until additional industry impacts are reported.
  • Until rainfall volumes begin to increase, forecasts remain firm in predicting that extreme drought conditions in Mexico could remain through the summer. This is due to a combination of inadequate rainfall, extremely high temperatures, and drier-than-typical weather conditions for this time of year. 
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