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News Article

Steel Prices To Decrease as New Plants Open

By Karin Dilge | Fri, 09/02/2022 - 16:51

According to Adriana Carvalho, Head of Metals in LATAM, SP Global Commodity Insights, the opening of new steel plants by Ternium and ArcelorMittal will bring more competition to the market. This will generate pressure to decrease steel prices. 

Furthermore, she explained that the strong competition in the Mexican market is rooted in the lack of diversity in the products produced and the high-quality standards imposed by the industry. In addition, Carvalho said that this competition has proven to be beneficial because it forces companies to offer discounts or provide tests, as well as new product packages. Buyers are taking advantage of this situation by trying out and approving new solutions from their suppliers, which in turn closely guard a sharp delivery time and quality of the product.

Carvalho added that fights for territory are common to guarantee a market share in the sector, especially when companies register lower exports and wish to safeguard their domestic sales. She pointed toward a decrease in imports due to a widened domestic offer and, most importantly, because of logistics prices, as well as risks such as delays in delivery commonly seen when importing.

“With this wide offer, there will be a natural decline in imports because companies think about the risks,” she mentioned. On the other hand, she said that given the fall of exports from Mexico to the US, Mexico should be looking toward Latin America instead. 

To increase its product portfolio, Ternium will invest US$1 billion in its Peaqueria, Nuevo Leon plant. The new investment program seeks to serve the automotive, renewable energy, construction, agriculture and home appliances industries.

The investment will enable the expansion of Ternium’s production capacity for advanced high-strength and ultra-high-strength steels toward the first half of 2024. The project includes the development of a new cold rolling mill, a hot-dip galvanizing line, a push-pull pickling line and new finishing lines. The steel company operates in Mexico, Brazil, Argentina, Colombia, the US and Central America, although Mexico is its most relevant market.

In April 2019, steelmaker ArcelorMittal allocated US$1 billion to expand its production capacity in Mexico, including a new rolling, mining and asset modernization line, according to El Financiero. This investment led to a historic high in FDI in the steel industry in Mexico, according to data from the Ministry of the Economy.

The steel industry represents 2 percent of the country’s GDP, 6.9 percent of its industrial GDP and 12.9 percent of the country's manufacturing GDP, according to the National Chamber of the Iron and Steel Industry (CANACERO). Bardahl Industry had projected that by 2020, steel production in Mexico would rebound and its success would be driven by the USMCA. However, COVID-19’s arrival strongly impacted the industry and triggered an unfavorable outlook.

The data used in this article was sourced from:  
Outlet minero, MBN
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Karin Dilge Karin Dilge Journalist and Industry Analyst