How has Química Delta evolved over the last five years?

Química Delta has followed a growth trend with a 50% increase in volumes since 2014. We achieved this expansion by diversifying our markets and our product range. We put a lot of effort into lubricants, personal and home care markets, and, two years ago, we entered the fuel business. With the Energy Reform, our organization decided to open a new division and a new company under the Exxia brand. Now we represent two large fuel producers.

We monitor internally an annual benchmark of the distribution industry in Mexico and, according to this data, we have consistently outperformed the industry average. In these five years there has been intense M&A activity in the distribution segment, with purchases of national players by transnational companies. This has caused the market to stabilize, with six or seven large players in the market now, and other medium-sized players.  

Which demand trends did you see in 2020, and what are your expectations for 2021?

Sales of chemical products are always linked to industrial activity. Until February 2020, before the pandemic, things were going quite well with the entire range of products we handle. Unfortunately, when the pandemic started, the government closed industrial activity and that dramatically affected sales in some of our product lines. This said, other products saw sales increase significantly. Supplies for disinfectants and soaps grew exponentially, as we had an explosive demand from the domestic and the US markets. Even though the economy was greatly affected, our company has managed to increase sales volumes with respect to last year.

What steps did you undertake to adapt to the pandemic?

The first fear we faced was potential liquidity problems due to the fall in demand for certain products, so our first reaction was to really take care of the cash flow, because we did not know how the banks would respond to this crisis. Fortunately, over the last few years our organization has worked hard to have a solid financial position, and this has allowed us to continue meeting our commitments with suppliers and other institutions.

From a product perspective, some markets dropped by 20%, while other high-volume products saw demand skyrocket by 600%. We had to adapt our logistics chains –the ability to react and adapt quickly to the new market conditions was essential. Besides, we adopted home office for the entire organization, and this made us incorporate new systems to carry out operations electronically instead of on paper. Today, the satisfaction rate among our employees has increased by more than ten percentage points. Now, analysts say that the economy will have to wait until 2023 to recover to 2019 levels, and this forces us to look for other sources of growth. We are currently working on our 2021 plan which involves maintaining growth as an organization without deteriorating margins.

What has been the effect of shale production in the US on Mexico’s petrochemicals industry?

There has been a dramatic change since shale gas and shale oil began to be produced in the US, as many of the production chains had moved out to other countries. An example is methanol, which began to be produced in South America or in the Caribbean. With shale gas, production began to return to the US together with many other chains such as polypropylene. Today, the US is Mexico's largest trading partner and a very important supplier, not only of petrochemicals, but also lubricants and fuels. It seems that the US will continue to be very competitive and the petrochemicals industry will continue to develop there.

What government policies and trade agreements are helping or preventing the industry from reaching its full potential?

The new North American free trade agreement is a relief for Mexico because it builds on the foundations we had since NAFTA in 1994. The only problem we see is with energy, as the US is concerned by Mexican efforts to protect its energy industry, most notably Pemex. Industry leaders are afraid that protectionist policies by the current administration will affect North American investment into Mexico. Meanwhile, with the pandemic the Mexican government has not supported companies directly, unlike other countries. Mexican business owners have had to fend for themselves.

What are your plans for the medium term at Química Delta?

With the pandemic, it is essential to adapt very quickly to the new environment. This includes digitalization. We are going to have to accelerate the digital transformation in our sector to improve customer service. There are tools available now to connect us with customers in a more efficient and transparent manner. Preserving cash liquidity will also be very important, especially as market uncertainty continues. Finally, diversification will also be essential, and with this comes developing agile logistics systems, especially to move fuels around.

As a summary, we want to consolidate the fuel business, because it is a new, huge market for us. We also want to consolidate our logistics. In parallel to this, we will continue diversifying our products, markets and geographies.