Mexico City — Alpek, the petrochemical company that is part of Mexican industrial conglomerate Alfa, will cut its filament production capacity in the midst of a global production surplus, mainly from Asia.
The decision will affect the factory linked to the subsidiary Akra, which has a capacity of 100,000 tons per year and is located in the northern city of Monterrey. Its production has represented a minimal contribution to Alpek’s total EBITDA in recent years, the company said in a statement.
The decision on the Monterrey plant was taken due to the pressures on profitability caused by the excess production of textile and industrial fibers worldwide, a market led by production in China, India and South Asia. The material is used in the manufacture of apparel, home furnishings and non-woven products for industrial and consumer use.
The North American region faces “strong competition” from imports of fiber, fabric, and finished products from Asia, a fact that has led to reduced margins, according to Alpek’s 2022 annual report. This situation has been compounded by low ocean freight costs from Asia.
“This situation is not expected to change in the near future,” the company said in its August 18 statement, clarifying that it will not replace its production in Monterrey.
The Monterrey plant is one of Alpek’s two filament production centers. The company has another production center in the Brazilian city of Ipojuca, which it acquired from Petrobras and has a capacity of 90,000 tons per year.
The closure of the Monterrey plant, with an annual production capacity of 100,000 tons, will imply the reduction of Alpek’s production capacity of this product by more than 50%.
Alpek’s decision comes amid declining profitability at the consolidated level. In the first six months of 2023, the company reduced its EBITDA by 65%. The petrochemical company reduced its EBITDA guidance for the year. Initially the company expected to close with an EBITDA of $920 million, but now the expectation is $770 million.
The closure of the Monterrey plant follows the decision to indefinitely close the PET resin production plant in Charleston, South Carolina, which was announced in March.
Unlike what will happen in Monterrey, production at the US plant was transferred to other facilities, a move that Alpek expects to reduce its costs by $20 million.