AHMSA’s Mining Branch Declares Bankruptcy

The Mexico-based steel producer Altos Hornos de México (AHMSA) announced that its mining branch, Minera del Norte, is now under legal protection after it went bankrupt. The company said that by declaring bankruptcy, it will be able to suspend payment obligations. 

According to AHMSA, it decided to go bankrupt after the state electric utility CFE decided to cancel contracts to supply coal for two of CFE’s thermoelectric plants: José López Portillo and Carbón II, both located in Coahuila. In mid-2020, AHMSA warned about the operational risks if CFE decided to cancel coal supply contracts.

The company said that it renewed the supply contracts through tenders for a period of 27 years. 

Nevertheless, in June 2020, CFE notified Minera del Norte’s commercial branch, Corporativo Industrial Coahuila, of its decision to terminate the contracts. The company said that the decision put several jobs in Mexico and the US at risk. “This decision will force Minera del Norte to fire the personnel of MICARE Unit, which employs 2,000 workers in Mexico and 400 in Texas, the latter employed by [AHMSA’s] Dos Republicas Coal Partnership. Most are Mexican residents. The decision would also affect over 5,000 workers of different [AHMSA] suppliers of goods and services,” the company stated at that time.

AHMSA had previously announced in October 2021 that it was evaluating the possibility of relying on Title 11 of the US Code, which allows companies to stay in business while restructuring their debt. The company said that it will take legal action against CFE to restore the economic and social damages caused by the contract’s cancellation.

In the past, AHMSA criticized CFE's decision to buy coal from unregulated suppliers, like the operators of the mine that collapsed on Aug. 3, 2022, in Sabinas, Coahuila. On Aug. 24, 2022, Francisco Orduña, Spokesman, Grupo Acerero del Norte (GAN) and AHMSA said that the collapse was in part the fault of CFE, as the state company had approved coal purchase contracts without further due dilligence. According to Orduña, the Mexican Geological Survey (SGM) made reports of coal mines that were ignored by Manuel Barlett, Director General, CFE, whom Orduña said should have verified the conditions of mines before granting concessions. “There were a series of political problems rather than technical and that is the result. There were several warnings about disorders in the mining sector if contracts were granted without checking the mines’ conditions,” Orduña said.