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News Article

Mexican Companies Exposed by COVID-19

By Ricardo Guzman | Wed, 02/26/2020 - 18:12

Production chains problems and raw materials rising prices due to the outbreak of COVID-19 (coronavirus) in China can turn into warning signs for some Mexican companies, according to analysts quoted by El Economista.

“While operations of companies listed in the Mexican Stock Exchange (BMV) may be limited by coronavirus, some of those companies have operations in China and even in Wuhan,” according to  a report by Ve por Más (Bx +). The industrial conglomerate Grupo Alfa and the mining company Grupo México stand out with  greater vulnerability.

Alfa’s risk comes from its subsidiary Nemak, which has a plant in China that represents 5 percent of their consolidated volume. “Likewise, Alpek and Sigma could be affected by certain commodities prices, such as oil and pork,” the study reports.

Grupo México’s sales in Asia and China represent 22 percent of their total revenues, as international copper prices rely strongly to the region’s markets. A similar situation is ongoing in Compañía Minera Autlán, given that China is a reference for manganese global prices and demand, creating another implication for steel companies, details the Bx + report.

Banco Base analyst Luis Alvarado points out that for mining companies China plays a major role, likely impacting energy prices and even Mexican petrochemical companies.

For Grupo México, Alvarado says investors who are oriented to cyclic metals can decide to move to safer investments. In Peñoles case it is different because silver is usually used as a refuge asset in times of uncertainty, and could even be benefited from a greater global crisis.

The Banco Base analyst said that uncertainty created by the outbreak can force global operations to come to a halt in several companies, affecting raw materials prices such as petrochemicals, mining products, and cement.

Photo by:   Nemak
Ricardo Guzman Ricardo Guzman Editor