Mexican Steel Industry vs. COVID-19 AftershocksBy Pamela Benítez | Mon, 01/17/2022 - 13:00
Mexico’s ferrous scrap deficit has caused the country to rely predominantly on US exports to cover the 18 million tons of scrap demand expected for 2025 despite facing a post-COVID-19 steel demand and border logistics recovery.
Mexico increased its net scrap imports by 115 percent since 2019, making 2021 the year with the highest imports registered by Mexican Customs. Data indicates that the country imported 2.37 million tons during the first 10 months.
However, as the country expects demand to increase due to steel mills and plant ramp-ups specifically in the northern region, Mexico faces a low number in ferrous scrap exports, falling 25.6 percent in 2021 and experiencing a 16 percent decrease since 2019.
This decrease has been attributed to the increase in prices due to limited scrap supply and conditioned peddler activity in the country caused by COVID-19 restrictions, as well as the high demand for steel mills construction in Mexico.
The need to cover the scrap domestic demand in the country has prompted efforts to contribute solutions using an evolution process through automation, simplicity and flexibility. Such is the case of Nuevo León-based Roca Acero, an important ferrous scrap dealer.
“In 2022, we will create a culture that adapts to the emerging needs and possibilities of the market, being conscious of the uncertainties and new challenges being faced by our supply chain […] it is no longer just about scrap generation but scrap as a strategic commodity,” said Lizette Camarillo, Chief Communications Officer, Roca Acero.
On the other hand, the USCMCA represents a growth opportunity for the Mexican steel industry with distribution and manufacturing activities in 2022, as the origin requirements specified in the trade agreement continue to attract steel-consuming companies to northern Mexico.
In addition, by using USMCA’s tariff facilities and taking advantage of US proximity, distributors and manufacturers in Mexico can bet for rail and road transportation to decrease the global supply chain’s uncertainty as containers and maritime logistics will be avoided.
The future looks bright for the Mexican construction industry, considered the most important steel consumer. This tendency is mainly attributed to President Biden´s US$1.2 billion infrastructure plan, which seeks to restore bridges and highways, benefiting Mexican producers of construction supplies.
Domestic infrastructure plans are also boosting steel consumption, such as the Dos Bocas refinery, the Mayan Train and the Felipe Angeles International Airport (AIFA).