Automotive investments are driving most of the demand
International investment in Mexico’s OEM automotive industry is still growing rapidly, leading to record levels of production and exports. “Mexico’s passenger car production in August recorded its highest monthly total of the year at 316,815 units, up 31% from a year earlier,” according to FreightWaves magazine.
Part of the expansion movement in the Mexican automotive industry is due to the reshoring trend to replace Asian production facilities with new investments closer to the US market (see week 22.03.22). This is further encouraged by regional trade agreements. “Mexico’s Free Trade Agreements (FTA) with the US, Canada and the European Union are encouraging several global players to establish their manufacturing bases across the country… (a crucial aspect driving the market,” according to a new research report by India MarkNtel Advisors, Industrial Coatings Market Analysis in Mexico, 2022.
Mexico’s industrial coatings market, which includes the automotive segment in the report, is expected to grow at a CAGR of around 19% over the period 2022-2027, according to the analysts. “The market growth is primarily due to massive investments in the manufacture of vehicles and their components, which have established new industrial plants throughout Mexico and in turn have boosted demand for industrial coatings in the country,” the analysts reported in September.
A recent investment in support of this wave came from PPG, which in August announced an $11 million investment to double production capacity at its powder coatings plant in San Juan del Rio, Mexico, by mid-2023. “With this investment, the plant will have new, state-of-the-art manufacturing technology that improves production practices and process flow,” said Guillermo Peña, PPG director, Industrial Coatings, Mexico, in the announcement.
Areas of growth in Mexico’s automotive industry include preparation for electric vehicle (EV) manufacturing, which is expected to expand rapidly over the next decade. Mexico plans to build a new EV automotive center in the northern border state of Sonora, which is already a leader in the production of lithium for EV batteries.
Industrial demand is also increasing
Other types of industrial demand for powder coatings are also increasing. Mexico Industrial production rose 3.8% yoy in June, according to CEIC Data, part of ISI Emerging Markets. The production rate hit an all-time high in May 2021 and a record low in May 2020, analysts report.
Among recent advances on industrial projects, Shawcor announced in August that its pipe coating business had won a CA$500 million contract from Transportadora de Gas Natural de la Huasteca, TC Energy’s Mexico subsidiary. The order includes pipe coating services for the Southeast Gateway Pipeline project, an offshore natural gas pipeline in southeastern Mexico.
As part of this announcement, Kevin Reizer, PPG’s President, said, “This project reinforces the trend of increasing large-scale project activations we are seeing around the world and, coupled with the recently announced Scarborough Gas Export Pipeline, will return Shawcor’s conventional offshore pipe coating activities to levels since not seen again after the oil price collapse in 2015.”
The recent PPG production expansion plan is expected to support many similar industrial projects in Mexico. “We have interesting innovations for the industrial market aimed at sustainability, anti-corrosion and the durability of the assets they protect with coatings, and with the pandemic we started looking for functionality in the antibacterial space,” PPG’s Peña told Mexico Industry in 2021.
“We plan to continue investing in production capacity, not only in volume but also in speed. What we are always looking for is to improve efficiency and streamline our processes, making them as simple as possible to have a much more manageable and efficient process for customer care,” Peña told Mexico Industry.
Another industrial manufacturing market for powder coatings in Mexico is semiconductors. “The rapid growth of Mexico’s consumer electronics industry is expected to drive demand for industrial coatings in the country between 2022 and 2027. In addition, the increase in foreign investment and increasing presence of companies through business expansion in the country are other key aspects that are expected to fuel the growth of Mexico’s industrial coatings market,” reported MarkNtel.
As part of the Biden administration’s landmark CHIPS bill, which will provide $50 billion in support for semiconductor manufacturing and research, the US government is seeking to expand Mexico’s role in chip manufacturing in North America. CHIPS will provide $28 billion in incentives for semiconductor production, $10 billion for new chip manufacturing, and $11 billion for R&D.
During a meeting between US Commerce Secretary Gina Raimondo and Mexican President Andrés Manuel López Obrador in September, Raimondo said Mexico has an opportunity to increase its chip testing, packaging and assembly capacity, a $60 billion industry in Mexico China and Taiwan, but currently worth only $3 billion in North America, the New York Times reported.
The architectural metals market is also growing
The use of powder coatings for architectural metal products in Mexico is also increasing. According to a May report by MarketsandMarkets, the global
The market is expected to grow from $5.1 billion in 2022 to $6.4 billion in 2027 at a CAGR of 4.6%. The analysts report that fascia & soffits is the fastest growing application segment for coil coating applications of the overall architectural metal coatings market.
In Mexico, airports, hotels and a variety of infrastructure developments rely on specialized metal coatings to provide impermeable and intumescent protection. According to statistics from the Camara Nacional de la Industria del Hierro y del Acero (Canacero), the national association of steel producers, Mexico produces 17.9 million tons of crude steel per year.
In March, the $4 billion Felipe Ángeles International Airport opened, the second airport to serve the greater Mexico City area and incorporating significant amounts of architectural metal components. This year, governments plan to invest US$600 million in the maintenance and modernization of existing airports.
Among Mexico’s architectural metal product suppliers, Rejimex International, a member of the Illinois-based National Association of Architectural Metal Manufacturers, is supplying coated metal components for the renovation and expansion of the Aeropuerto Internacional de la Ciudad de México (AICM).
Hotel construction is another important segment of the architectural metal market. According to Lodging Econometrics’ latest Construction Pipeline Trend Report, Mexico has the largest hotel construction pipeline in Latin America. “A total of 207 projects and 38,671 guest rooms are currently under development in the country, far surpassing Brazil’s second-place status of 97 projects and 15,901 guest rooms,” analysts said in February.