Mexico Mexichem, Pemex to proceed with $566m VCM joint venture

22 January 2013 19:56  [Source: ICIS news]

MEDELLIN, Colombia (ICIS)--Mexichem said on Tuesday it would proceed with a joint venture for vinyl chloride monomer (VCM) production with Mexico’s state-owned oil and gas company Pemex, just two months after the Mexican chemical giant withdrew from the $566m (€425m) project.

Mexichem’s announcement follows Pemex’s decision to finally approve the deal that will upgrade Pemex’s VCM plant at Pajaritos in the Mexican Gulf state of Veracruz.

VCM production at Pajaritos is expected to increase by 24,000 tonnes in the first year of operation, 146,000 in the second and 217,000 in the third, Mexichem said.

“This co-investment will enable the vinyl-chlorine production chain in Mexico to maintain its competitiveness given the disadvantage it faces, in terms of integration and size, compared to its North American competitors,” Mexichem said.

Earlier, the outlook for the joint venture appeared less optimistic.

The deal was first announced in June 2011 and had been waiting for Pemex board backing since it secured antitrust approval in October.

Mexichem said in November it was scrapping the project because of Pemex’s continual wavering in signing off the deal and would concentrate instead on overseas opportunities for its VCM expansion.

Pemex later insisted that the joint venture was still possible and that a vote would take place in the next administration.

Final approval is a relief for Mexichem, who have been keen to secure the long-term supply of VCM needed for its polyvinyl chloride (PVC) operations.

Mexichem is the largest producer of PVC resin in Latin America.

“For Mexichem, this represents an opportunity to reduce its dependence on the supply of its main raw material from its foreign competitors,” the company said.

The company is currently mulling a joint venture with OxyChem, under which the US-based company would build an ethane cracker in Texas and use the ethylene to produce VCM. OxyChem would then ship the VCM to Mexichem.

OxyChem said on Tuesday it had no comments on the Mexichem-Pemex joint venture.

($1 = €0.75)

By: Simon West

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