CHALCO, Mexico (Reuters) - This swampy township of garbage dumps and junk yards on the edge of Mexico City is hundreds of miles from the traditional drug-producing areas in the Sierra Madre mountains where trafficking gangs have long grown marijuana and opium.
But when soldiers stormed a nondescript warehouse in April, they found that a drug cartel had moved into Chalco to churn out tons of their latest hot product, methamphetamine.
Behind a sign saying it stocked cleaning goods, a row of huge cauldrons covered in domed glass cooked up barrel-loads of the synthetic white powder, known as crystal meth or ice.
The warehouse was one of a record number of super-labs that Mexican authorities have busted in recent months, showing that despite President Felipe Caldron's five-year offensive against drug cartels, Mexican meth production is booming.
The burgeoning industry is a major concern to police as it gives cartels a highly profitable product that can be made using legal ingredients in any town, spreading Mexico's brutal drug war to areas that had previously been free of violence.
It has also set off alarm bells in the United States, where agents who have spent years battling the effects of the destructive drug fear there may be a sudden surge in supply.
In the first quarter of 2012, Mexican soldiers raided 27 industrial meth labs like that in Chalco, twice the number they stormed in the same period of 2011 and their biggest ever total in any three-month period, the attorney general's office said.
Their most spectacular meth seizure was in a ranch outside the western city of Guadalajara in February, when they nabbed 15 tons of processed crystal, one of the largest hauls of the drug ever made worldwide.
If sold in small doses to U.S. users, known as "tweekers," that meth would have been worth about $1.2 billion (743.4 million pounds).
"This industrial production of methamphetamines is worrying as it shows a new phase in drug trafficking," said Jose Cuitlahuac Salinas, head of Mexico's organized crime unit. "Combating these laboratories is a top priority."
Meth used to be made mainly in the United States by biker gangs and others who cooked up the crystal in small makeshift labs, often in trailers or household bathtubs.
However, the U.S. Combat Methamphetamine Epidemic Act of 2005 made it harder to get hold of precursor chemicals needed to make the drug, including pseudoephedrine and ephedrine, which are used in commercial products such as flu medicine.
While that law and a subsequent police offensive have hammered U.S. production, it has been a gift to Mexican cartels.
"We are a victim of our own success," says Matthew Allen, special agent in charge of Immigration and Customs Enforcement in Arizona. "When you look at domestic meth labs, those numbers have fallen off the table. But where have they gone? Mexico."
The U.S. seizures confirm that increasing amounts of the crystal are being moved north into the United States over the nearly 2,000-mile-long (3,200-km) border it shares with Mexico.
In fiscal 2011, U.S. agents brought in 20,000 pounds (9,000 kg) of meth on the southwest border, showing quantities have doubled since 2008, when agents confiscated 9,500 pounds (4,300 kg).
Agents also note that U.S. street prices are either flat or down, a sign that supply is high.
While Mexico has clamped down on sales of precursors from pharmacies, the cartels are importing their own shipments of chemicals on an industrial scale.
In January, Mexican marines seized 32 tons of illegally imported precursors on a ship at the Pacific port of Manzanillo, one of many busts made on that coastline over the past year.
The traffickers also use coasts further down into Central America, with Guatemalan authorities making major seizures of precursors linked to Mexican cartels this year.
The chemicals in the Manzanillo raid had been manufactured by a company in China.
Precursors bound for Mexico have also been manufactured as far afield as Iraq, India and the Central African Republic, according to the International Narcotics Control Board.
The chemicals are often imported by seemingly legitimate front companies, making the search more difficult. In April, the U.S. Treasury blacklisted 12 companies in Mexico it accused of bringing in precursors to make meth.
Meth attracts users by giving them energy boosts to work or party for long periods without rest. It is also popular for boosting sexual appetite and stamina, former addicts say.
But doctors say that meth is one of the most lethal drugs around, even more harmful to many than heroin or cocaine.
"Crystal meth may make people feel good for a while but then it totally destroys folks," says Matthew Frances, an emergency room doctor in California, who regularly treats meth users.
"People get agitated and paranoid and are screaming and shouting. They can stay up for days without eating and not take care of their kids. They often get in terrible car accidents."
Long-term meth use can also lead to heart failure and produce chronic tooth decay, known as "meth mouth."
It is unclear yet if the increase in Mexican production will lead to more use in the United States.
The most recent U.S. government survey reflects 2010 data, when there were an estimated 357,000 regular meth users, about the same amount as 2007. However, agents believe it is at risk of growing.
"I think that you are going to see an increase in meth abuse nationwide," said Doug Coleman, the special agent in charge of the Drug Enforcement Administration in Phoenix, Arizona. "With the amount that's coming across, it's definitely a concern."
Mexican cartels may also be looking at other markets for their product. Meth has risen in popularity globally to become the second-most used type of drug after marijuana, according to a United Nations report on drugs and crime.
Mexico itself also has a rising number of meth users given that more than 360,000 people have tried the drug at least once, according to the health ministry.
In Chalco, residents complain of dealers selling meth in $3 doses on street corners and out of the barred windows of homes: just enough to get users high for an hour or so before they crave more.
For decades, Mexico has been a major producer of heroin and marijuana and a trafficker of Colombian cocaine.
The move into methamphetamine gives the cartels a product which they can produce anywhere, without having to share profits with their Colombian partners.
At first, police bust meth labs in traditional drug-growing areas such as the western states of Michoacan and Sinaloa.
But following heavy raids, cartels have shifted production to areas with no history of trafficking, including one massive lab discovered recently in the prosperous city of Queretaro.
Mexican agents say the labs in Chalco belonged to La Familia cartel, which has been linked to major meth production since it first surfaced in Michoacan in 2006.
Federal police captured a Familia leader in the township recently, sparking a battle in which the traffickers hurled fragmentation grenades and opened fire in broad daylight.
La Familia gunmen are also blamed for carrying out execution-style killings and beheadings in Chalco, turning it into yet another flashpoint in Mexico's relentless drug war.
All told, more than 50,000 people have been killed in drug related violence in Mexico since Calderon took office in December 2006 and launched a crackdown on traffickers.
The incursion of drug gangs into Chalco has made locals worry about their safety, said Gerardo Vazquez, a 41-year old shop owner living close to the raided meth lab.
"I just thought it was a normal warehouse and suddenly soldiers turned up," Vazquez said. "This is a big problem. You worry that your kids may get caught up in a shootout."
(Additional reporting by Tim Gaynor in Phoenix and Mike McDonald in Guatemala; Editing by Kieran Murray and Eric Walsh)