Rising Metal Prices, Geopolitical Tensions Boosted Mexican Mining

Rising precious metal prices and a weaker peso against the US dollar were key factors driving the mining sector's strong performance between July and September 2024, according to industry experts. However, challenges like uncertainty surrounding unfavorable mining regulations and labor disputes were factors that challenged the sector. 

According to Banxico’s Survey on Regional Economies for July-September 2024, the mining sector recorded its fifth consecutive quarter of declines. The oil and gas extraction segment continued to contract due to declining trends in oil production platforms and gas extraction. Mining-related services increased compared to the previous period, although they remained at low levels. The metallic and non-metallic minerals mining subsector saw limited activity. The southern region continued its slow decline, the central-northern region experienced a decline, while the northern and central areas expanded from lower levels.

In the northern region, the demand for copper, driven by the production of electric vehicle (EV) batteries, and ferrous alloys for the automotive industry, particularly for corrosion-resistant auto parts, remained steady. While there was no significant increase in demand for metals for renewable energy projects, the construction of electrical distribution lines and the opening of electric vehicle charging stations maintained high levels, notes the report. Additionally, stone mining accelerated its supply to the construction industry in northern Baja California and San Diego, the United States.

In the central-north region, mining companies reported high production levels of gold, silver, copper, zinc, and lead, driven by higher-than-expected mineral grades, new deposit discoveries, the availability of mills, and improved processing technologies. “In this region, the demand for gravel and sand increased due to the ongoing construction of the Mexico-Toluca Interurban Train segment toward Mexico City, land preparation for industrial parks, and housing developments near AIFA, as well as industrial facilities in Guanajuato and Queretaro,” reads the report. 

Unfavorable Regulations Hinder Mining 

Mining insiders across all regions noted that uncertainty surrounding the Mining Law reform continued to impact operations. They also pointed to the potential reform to ban open-pit mining, exploration permits, water use restrictions, and delays in granting extraction and processing plant construction permits. In the north and center-north, producers of smelting minerals noted that steel exports to the United States were restricted due to suspicions that domestic production included content of Asian origin. In the center-north and center, respondents reported that their operations remained affected by insecurity, particularly frequent theft and extortion incidents.

Among other challenges were reduced steel demand affecting mineral inputs for smelting processes, labor disputes leading to operational halts in various regions, and rising costs of imported inputs like machinery parts and fuels due to exchange rate fluctuations. Additionally, increased competition from foreign companies in international markets, regulatory concerns, and infrastructure issues further limited non-oil mining.