Mexico’s Mining Production Value Grew 1.4% in July 2024: Banxico

In July 2024, Mexico’s mining production value grew by 1.4%, driven primarily by the rising prices of gold, silver, copper, zinc, and other metals, according to a Banxico report. While demand from green and innovative technologies bolsters the sector, industry insiders cite political uncertainty and insecurity as significant operational challenges.

According to INEGI’s Monthly Index of Industrial Activity (IMAI), the mining sector's monthly production value increased by 1.4%. However, there was a 0.2% contraction when compared to the same period in 2023. When examining only metal and non-metallic mining, this subsector saw a 0.4% increase in monthly production and a 9.2% increase year-over-year.

According to executives surveyed in Banxico’s Report on Regional Economies, the growth of the mining sector between April and June was primarily attributed to rising international metal prices. This rise in prices was partly attributed to restrictions on Russian metals in the United States and United Kingdom exchanges, as well as expectations of a recovery in global manufacturing.

The report also pointed to increasing demand from China for industrial metals, such as copper, zinc, and lead, as another key contributor to the price surge. The central bank also linked the rise in precious metal prices to a diversification of central bank reserves, geopolitical tensions, and expectations of a global reduction in interest rates, which has led investors to turn to precious metals as a safe haven. 

Business executives added the depreciation of the Mexican peso against the US dollar at the end of 2Q24 allowed companies to increase their revenue in pesos from mineral sales. Finally, executives noted a rise in both external and internal demand for copper from the electronics industry and for electrical equipment manufacturing.

Executives in northern Mexico highlighted the growing demand for stone minerals, including sand and gravel, used in residential and commercial construction projects in Baja California and Nuevo Leon. Executives in Sonora and Chihuahua also reported increased demand for zinc and silver from the automotive industry. Silver, in particular, was sought for the production of electrical circuits, screens, glass, mirrors, and solar panels.

In the center-north region, fluorite producers saw increased profits due to the rising value of the mineral, which has gained importance due to its applications in electrification, batteries, and refrigeration technologies. Meanwhile, the center region saw investment in new technologies to improve exploration, which executives believe will result in higher production volumes. Demand for construction materials, like gravel and sand, also rose in this region due to the expansion of office buildings and industrial warehouses, particularly in Guanajuato, Queretaro, and Hidalgo.

Challenges for Mining Executives

Despite the positive trends, the mining sector also faced challenges. Respondents from all regions noted higher transportation and electricity costs, as well as the impact of the appreciation of the Mexican peso against the US dollar earlier this year.  

Banxico’s report also highlighted the uncertainty surrounding reforms to the sector’s legal framework. Executives expressed concern about delays in granting extraction permits, which they believe is limiting investment. 

In northern Mexico, uncertainty related to electoral processes in Mexico and the United States led to delays in private construction investments, which reduced the demand for mineral inputs. The demand for iron ore used in specialized steels for the foundry industry decreased. This decline occurred as the metal-mechanic industry accumulated inventories of less expensive Asian steel compared to domestic options.

Environmental factors also impacted the mining sector, as in Baja California and Sonora, open-pit mining operations had to be temporarily suspended due to high temperatures during 2Q24. Drought conditions in San Luis Potosi negatively impacted mining production and increased costs due to water scarcity.

Labor disputes also affected mining activities during the quarter, with significant disruptions in Durango and Michoacan. Insecurity is another key challenge affecting the mining sector, as it continues to raise costs for businesses.