Malaysias Petronas Lubricants International recently closed its lubricant blending plant in the metropolitan region of Buenos Aires, Argentina, in favor of third-party contracting and canceled construction of a larger blending plant nearby because of the South American countrys ongoing economic crisis.
The company has shut down its lubricant blending plant - which has 13,300 metric tons per year production capacity - in the town of Ezpeleta, Petronas Lubricants International communications spokesperson Julia Jaafar told Lube Report.
To fulfill customer requirements, Petronas has decided to supply market demand through toll blending partnerships with local service providers. Our full volume production is now being outsourced to [Destileria Argentina de Petroleo S.A.] and Quimica True, a local chemicals company, Jaafar said.
The company also confirmed that it will not continue the construction of its new facility in the Ezeiza Industrial Park. In 2016, before the start of the Argentina economic crisis, Petronas announced plans to build a lubricant blending facility able to produce 21,000 to 31,000 tons per year. Construction began on that plant in February 2016, Petronas said at the time, and the plan was to relocate the existing blending plant to the new facility.
Its construction would have increased production, strengthened Petronas supply chain and supported the growing lubricant demand for passenger cars and commercial vehicles in Argentina and neighboring countries. The companys plans were impacted by the ongoing economic crisis in the country.
Hit with high inflation and a devaluating currency, Argentina has faced economic difficulty since mid-2018. Besides last years gross domestic product falling 19.5 percent year-over-year to around U.S. $519 billion, inflation is above 50 percent, and the benchmark interest rate is topping 85 percent. As a result, in January to August, new car sales were down 47 percent to 327,206 units, according to local fleet media news service Fleet LatAm.
Argentina is and will remain an important market to PLI and the company will continue selling its products in the country through its direct presence and existing distribution channels, the spokesperson asserted.
However, according to local press reports, the decision to outsource has received pushback from a group of 14 former Ezpeleta blending plant employees who are denouncing the closure and claiming that it is illegal. The workers group has complained to the labor ministry in Quilmes and seeks to have its members jobs reinstated at Dapsa.
According to Petronas, the Ezpeleta plant closure was unavoidable because of the need to adhere to new local regulations, and the company claimed it closed the plant in full compliance with relevant requirements. Petronas stated that it made every effort to retain all employees affected by the cessation of the plant before implementing severance payments that were due to them under applicable laws.
We acknowledge that we have received claims from some of the affected employees. As the case is still in proceeding, we are not able to share further details, Jaafar said.
Established in 2008 and headquartered in Malaysias capital of Kuala Lumpur, Petronas Lubricants International manufactures and markets automotive and industrial lubricants to more than 80 countries.
Its operations in Latin America are headquartered in Belo Horizonte, Brazil, home to a blending plant and a research center focused on commercial vehicle lubricants. Its regional business exports to over 15 countries in Latin America, and it has distributors in Chile, Colombia and Peru.