Devaluation of China’s yuan to increase Mexican imports of steel

China’s currency devaluation has raised a red flag for Mexican steel producers, as imports of steel from the Asian country are expected to increase, according to financial analysts said.

Despite the recent measures released by the nation’s economy secretariat, SE, and Canacero, which aim to prevent imports of Chinese steel, analysts said that the CNY devaluation will put some pressure on the already struggling steel producers.

“Having a cheaper CNY is a risk, because it will increase the imports of products from China, impacting the local companies. The steel is one of the weakest products in a situation like this,” a media report said, quoting Fernando Bolaños, analyst at Monex.

Imports of steel from China are reportedly to have increased by 85 percent, year-on-year, for the cumulative period of January-May, to 352,000 mt.

According to media reports, Mexico’s AHMSA is one of the most exposed companies. The company posted in Q2 a $19.1 million operating loss due to the imports of steel.

Despite being considered as positive by most steel producers in Mexico, the recent measures released by SE and Canacero are yet to show their positive effects.

Despite welcoming the move, AHMSA said recently that the measures were announced too late. According to AHMSA, the company’s expectancy for the measures is positive, but AHMSA will wait to see if the measures “work effectively,” it said.

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