Image credits: Luis Vidal
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News Article

Minerals and Nearshoring: Opportunity for Mexico

By Fernando Mares | Tue, 08/02/2022 - 15:36

As companies are looking toward nearshoring strategies to make their supply chains more resilient, Mexico is becoming an attractive destination for investment in areas like semiconductor manufacturing or pharmaceuticals. The mining industry is expected to benefit too, owing to the country’s strong connection to the US and Mexico’s abundance of crucial minerals for the US industry, experts said. 

Mexico and the US share a border, which allowed them to avoid the effects of the container and port-related supply chain problems caused by the Russian invasion of Ukraine and the COVID-19 pandemic. Currently, over 88 percent of Mexican exports are transported by road. This has led Mexico to become the second-largest trading partner of the US with business worth US$661.2 billion in 2021. Mexico closely trails behind Canada, with US$668.8 billion, and surpasses China, with US$657.4 billion. 

In this context, US president, Joe Biden’s supply chain resilience strategy aims to secure reliable suppliers in four strategic sectors: semiconductor manufacturing, high-capacity batteries, critical minerals and rare minerals, as well as pharmaceutical resources.

According to IHS Markit in 2020, the US Department of Defense identified 58 strategic minerals for which the country needs to rely on imports like fluorspar, gold and lead, among other minerals. Currently, Mexico is among the three main suppliers of 14 of these minerals. In addition, the country has increased the production of most of these minerals in the past five years, which could allow it to increase its exports to the US market. Amid an escalation of tensions between the US and China, Mexico and the US could capitalize on the latter’s production of graphite, lead and selenium.

If Mexico’s producers do not export, their minerals could be integrated into other supply chains in Mexican industries. For example, bismuth can be used by the pharmaceutical industry or graphite by semi-conductor manufacturers.

Copper is one of the key minerals in the energy transition, too. Mexico is the fifth-largest holder of copper reserves in the world, with 53 million tons, just behind Russia with 62 million tons. Regionally, Mexico is the third-biggest country with the largest reserves, just behind Peru and Chile. 

IHS Markit’s analysis warned that although nearshoring seems attractive, companies must consider certain threats like organized crime, civil unrest and political uncertainty. The report highlights lithium, which after the Mining Law reform became a state-exclusive production activity. It is expected that if Morena, the ruling party, remains in power after president López Obrador’s term finishes, policy toward lithium will remain similar. Nonetheless, the president has assured its trade partners they would be able to benefit from lithium as well.
 

The data used in this article was sourced from:  
IHS Markit, MBN
Photo by:   Luis Vidal
Fernando Mares Fernando Mares Junior Journalist and Industry Analyst