Inflection point confirmed! Mexico's chemical industry has shaken off trade drag, with production capacity and investment gradually picking up

Martin Toscano, President of Evonik Mexico and board member of the Mexican Chemical sector Association (Aniq), introduced that the downward cycle of Mexico's chemical sector began in March 2025 and the slump lasted until the beginning of 2026. Demand in multiple market segments across the entire sector chain was weak and investment pace slowed. As the trade situation gradually becomes clearer, most domestic chemical markets have now bottomed out, and the sector's recovery direction is clear.

Export data has have become core evidence of the sector's recovery. Mexico's chemical product exports to the United States have hit a record high, fully confirming that the regional sector's ability to withstand trade frictions far exceeds market expectations. Martin Toscano admitted that the uncertainty over the renewal of the US-Mexico Free Trade Agreement did suppress the research of some chemical segments between 2025 and early 2026, however the current sector landscape has improved significantly. "while the current investment scale and aggressiveness are not as good as the previous peak, the vast majority of the chemical sector chains we have laid out show clear investment willingness and development possible."

Regarding the highly anticipated progress of the US-Mexico-Canada Trade Agreement (USMCA) negotiations, the sector generally predicts that the situation will continue to enhance. Previously, the three parties of the United States, Mexico and Canada failed to complete the renegotiation of the agreement and finally reached a one-year extension agreement. Currently, the negotiations have entered a critical final stage, and decisive progress will be made in the coming weeks and months. Combined with the latest government-enterprise communication dynamics, the market is greater inclined to first reach a bilateral US-Mexico trade agreement rather than a tripartite agreement including Canada. At the same time, the existing trade treaty framework allows the basic terms of the agreement to be maintained through annual review mechanisms, providing a stable policy security net to the research of Mexico's chemical sector.

Compared with the situation a year ago when trade uncertainty fully suppressed sector investment, current market risks have been greatly alleviated. Martin Toscano said that before the formal agreement is signed and implemented, uncertainty will still objectively exist, however the substantial progress made in multi-party negotiations has significantly boosted market confidence, and the sector's investment ecological stability continues to enhance. He emphasized that many Mexican chemical items and sub-technologies have extremely strong irreplaceability, and the US market is difficult to rapidly achieve production capacity replacement, which is also the core advantage of the regional chemical sector's resilient recovery and prolonged stable research.

In addition, the interview deeply analyzed the prolonged research constraints of Mexico's chemical sector. Mainstream chemical sector companies support the Mexican government's reform measures to introduce private capital into the crude oil and natural gaseous sectors, however have concerns about the policy implementation methods and execution results. The sector generally believes that Mexican national oil company Pemex could have been the core carrier driving the take-off of the regional chemical sector, however its operating performance and financial situation have continued to deteriorate over the past decade, and has instead have become the main short board dragging down the research of the chemical sector.

Excessively high energy costs are the key pain point restricting the discharge of production capacity in Mexico and Brazil, the two core Latin American chemical markets. The two regions have abundant energy resources reserves, however the price of manufacturing natural gaseous remains high, resulting in the operating rate of chemical vegetation being far reduce than the designed production capacity, and the sector's possible has not been fully released, which is in sharp contrast to the "supply shortage" dilemma of the European chemical sector. In contrast, in Argentina's Vaca Muerta oil and gaseous producing area, if the relevant natural gaseous resources are deeply developed, the natural gaseous price can be leveled with the level of the Gulf of Mexico, which is expected to bring significant cost advantages and competitive dividends to the entire Latin American chemical sector.

This interview was recorded before the news of BASF's acquisition of Evonik came out, and the acquisition proposal was officially terminated on September 29.