During the ongoing Alacero 58 Congress held in Cancún, Mexico and attended by SteelOrbis, Director and Vice Chairman of the Tenaris Board and Canacero President Guillermo Vogel noted that while a collapse of NAFTA is unlikely to happen, it is good for relevant Mexican firms to “take action and proceed with preventive measures” if NAFTA renegotiations don’t go well. The potential lack of NAFTA would not mean no imports to the US, Vogel said, but just slightly different terms and costs. Mexican firms already have an unparalleled logistics infrastructure in place to service the US. Additionally, Mexico should diversify as it is “prepared to export also to other countries.”
If NAFTA were to continue, the probability of Mexico and Canada being excluded from Section 232 is more likely than without the trilateral agreement, Vogel said. He acknowledged that the investigation is currently on hold, and it is unpredictable to know its final status given the rhetoric of President Trump. Section 232, while it would not close off the US steel market, it would not only affect Mexico but would have worldwide effects. While the outcome is unknown, Vogel noted that Section 232 is being strongly lobbied against by Chamber of Commerce entities and various associations that represent a significant voice of downstream steel enterprises to balance the voice of the steel mills who are pushing for Section 232 protections.
In his analysis, Vogel forecast the expected downtick of growth in Mexico from 5.7 percent in 2017 to 3.0 percent in 2018. He attributed the slower expected growth to unknown factors regarding NAFTA and the Mexican elections in mid-2018. He attributed the slight investment delays in the steel industry primarily to those two factors. Generally, he predicted slow growth in 2018 but increased investments and growth in 2019 and, especially, in 2020 after two years of domestic public policy changes due to pressure on Mexico’s fiscal deficit.