Amid one of Mexico’s most severe droughts ever, several parts of southern Tamaulipas state have been impacted. The state governor announced a state of emergency on June 5th 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.
Various industries in Tamaulipas were forced to shut down operations partially or fully. At least seven companies are affected in some way, ranging from operating at limited capacity to declaring force majeure on all operations. As forecasts predict that drought conditions in Mexico may last through the summer, the number of affected companies in the state will likely increase as water reserves dwindle. However, prospects for increased rainfall in June amid the start of tropical cyclone activity may reverse the forecasts in the weeks to come.
Mexico’s drought disrupts chemical-petrochemical production
During April and May, most areas in Mexico, including the Tamaulipas state, received between five and 50% of their normal rainfall volumes. Historically, this ranks as the fourth driest period since 2000. Additionally, dryness has contributed to amplified heat across the region, with record-high temperatures recorded this year.
There are proportionally high impacts in the Altamira municipality, home to a cluster of petrochemicals and industrial chemicals facilities. 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.
The industrial shutdowns could end up affecting U.S. petrochemical production. Tamaulipas is home to key suppliers to several downstream production processes, including polyethylene terephthalate (PET). Most of the chemical producers have not yet offered any indication of when operations might return to normal. 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. Medical device and electronics companies rely on suppliers including the world’s leading supplier of hand-wrapped interior trim components for the automotive sector. 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.
Everstream clients are receiving more detailed insights and recommendations about this risk.
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