Abstract
The Mexican steel industry is set to feel the full force of the global
economic crisis, with steel output
likely to plunge as domestic industry
grinds to a halt and export markets in North America dry up,
according to
BMI’s Mexico Metals Report.
In 2008, Mexican steel output grew by
just 0.3% and output drastically declined from September, with
Q408 output
down by around 25% year-on-year (y-o-y). The situation worsened further in the
first two
months of 2009, when output declined to 800,000-810,000 tonnes,
nearly half the level of the same period
in 2008. The cuts in output were
carried out in response to a rapid decline in demand, although its imports
of steel from the US rose 27.6% y-o-y to 2.9mn tonnes in January.
The
Mexican Mining Industry (Camimex) has warned that the sharp fall in prices of
industrial metals has
led to plant closures, layoffs and the suspension of
projects in the mining industry. For example, Minera
Autlan was forced to
close its ferroalloy plant at Gomez Palacio in Chihuahua state and lay off
workers
at its plant in Puebla state. Minera del Norte, an iron ore
producing subsidiary of Altos Hornos de
México SsA de CV (AHMSA),
also announced closure of its extraction, grinding and milling activities
at
Camargo in the northern state of Chihuahua for a minimum of six
months.
The economic crisis has put Mexico’s hopes of securing a
higher rate of growth over the medium-term
into jeopardy, and there are
lingering uncertainties over whether it will meet its 32mn tonnes per
annum
(tpa) target by 2020. Mexican production capacity is expanding, yet
domestic demand in Mexico for
carbon and stainless steel sheet is falling.
BMI estimates that apparent steel domestic consumption fell
5% in 2008 to
around 18.5mn tonnes, with net imports falling to 900,000 tonnes. We forecast
a further
30% drop to around 13.0mn tonnes in 2009 as key-consuming
industries have ground to a halt. The
overall economy is forecast to
contract by 5.5% in 2009, with industrial production set to nose-dive. The
upshot will be a 38% fall in steel output to just 10.9mn tonnes. However, BMI
anticipates a strong
recovery in output from H210, in line with a recovery
in demand and rapid expansion of capacity. By
2013, output should be
approaching 24mn tonnes, an increase of around 36% over 2008 levels.
Slowing domestic demand means that Mexican producers are looking to the US for
exports. In February
2009, the Mexican Iron and Steel Producers
Association announced that the US would implement a trade
protection
policy, to prohibit the use of iron and steel materials imported from Mexico
in infrastructure
construction. This will slash Mexican steel exports to
the US, with the association protesting that it
violates NAFTA and the
WTO’s free trade provisions. The government is likely to take the matter
to the
WTO if the US is unwilling to drop its protectionist stance. In
April 2008, a WTO ruling found against
the US for imposing excessive
dumping feeds on stainless steel from Mexico.
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