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Analysis

Steel Wings to Strengthen National Industry

Wed, 10/21/2015 - 10:00

Altos Hornos de México (AHMSA) has been one of the pillars of the Mexican steel industry for over 65 years, providing quality steel for many of the country’s flagship projects. Today, AHMSA stands as the largest integrated steelmaker in Mexico, with its production ranging from basic raw materials to finished products with higher added value. AHMSA currently produces about 3.8 million tonnes of liquid steel per year, covering about 50% of the national demand for steel plates, and has a workforce of 19,000 people, including in its mining subsidiaries. Headquartered in Monclova, Coahuila, around 250km from the US border, it has two steel plants in the same city. The coal region of Coahuila is also where AHMSA has set up its own metallurgical coal mines, from where the coal is transported by rail to its smelters in the state. Additionally, the company operates large thermal coal mines in the municipality of Nava, near the US border, which produce about 7 million tonnes. The production of these operations is sold to local power plants operated by CFE. Beyond coal, AHMSA also has several iron mines across the country, but its main sources of this metal are located in the desert area of Coahuila. The mineral concentrate is extracted and sent to the smelting facilities in Monclova through a dedicated, 295km steel pipeline.

The company’s origins date back to the Second World War when there was a global scarcity in the supply of steel. In order to ensure Mexico would have the steel products it needed for its industrial development, a group of businessmen teamed up with the Mexican government to build an integrated steelwork plant. Along with a firm from the US, American Rolling Mill, the government decided to establish the steel plant in Monclova due to its closeness to some of Mexico’s largest coal and iron deposits. AHMSA was constituted in 1942 as a company with mixed state and private capital. The company began to import equipment from the US, with the first machinery arriving in Monclova in April of that year. Later that year, the company officially began the construction of the steel plant. Between 1944 and 1948, production increased steadily from 40,000 to 100,000 tonnes of liquid steel per year. In 1960, the smelter saw its capacity explode as this was expanded to 2 million tonnes of liquid steel per year. This expansion firmly established AHMSA as the biggest steel company in Latin America. Throughout the 1970s, and after several further expansions, the company achieved production of 3.75 million tonnes per year. Sadly, this boom period was bound to end one day. In 1989, AHMSA found itself in enormous debt while facing operational inefficiencies and high environmental impacts. The federal government was unsure about selling or closing the operations, but it finally decided to divest the company from the public sector through a bidding process. After presenting the best financial and investment offer, Grupo Acerero del Norte (GAN) was awarded the winning bid. The AHMSA package covered all its steel mills, iron ore and coal deposits, which GAN took over in December 1989. The new administration then undertook an aggressive program of modernization of its new acquisitions, including all of AHMSA’s mines. A total of US$1 billion was invested to upgrade equipment, technologies, processes, personnel, and environmental protection systems at AHMSA facilities. This was pronounced a success during the 1990s when AHMSA achieved record production in 1994 and finally returned to being the globally competitive company that Mexico needs it to be.

AHMSA adopted a philosophy of commitment to the welfare of its staff, their families, and to the communities surrounding its operations. The company has been participating with local authorities to develop programs for community development, especially in education, public safety, and urban cleaning. In addition, the company implemented several programs to enhance and ensure the caretaking of the environment. The US$300 million destined to protect and preserve the environment surrounding its steelwork and mining facilities have positioned AHMSA as an example of social responsibility.

One of AHMSA’s most important recent achievements is the opening of the refurbished El Fénix steelworks in Coahuila. The company has invested over US$2.3 billion to create vast production capacity to service the mining and automotive industries, as well as Mexico’s expanding port infrastructure. These new facilities include a plate Steckel mill, a blast furnace, one pot furnace, an oxygen plant, and an electric arc furnace to produce a fourth slab machine. Their addition to El Fénix will provide AHMSA with the ability to increase its production to 5 million tonnes of steel annually, up from the current rate of 3.8 million tonnes. During the construction of the El Fénix project, over 10,000 jobs were created, and now the project is fully operational, it provides 3,000 direct and 16,000 indirect jobs.

According to a press release from AHMSA, President Enrique Peña Nieto himself remarked that the new capabilities of the company will trigger significant investments, grow the Mexican industrial chain, provide a boost to productivity, and create increased employment opportunities.