The tax system in Mexico makes part of the collection of metal scrap difficult, particularly affecting the so-called domestic scrap or street scrap that operates in the informal market and for mini steel mills like DeAcero the solution is to import the input for steel production.
"We have to import metal scrap from California, because our electric arc furnaces (EAF) cannot be stopped. We have to melt and import scrap, when we could be collecting it here," said one of DeAcero's spokespersons, Juan Antonio Reboulen, in an interview with the Mexican newspaper El Norte.
In Mexico, "there is not enough concentration and collection, because there is no appropriate tax scheme to encourage the activity (...) The peddlers do not have the capacity to register with the Treasury and declare taxes (like the American Internal Revenue Service, IRS). It is very complicated for them to achieve that and the (tax) law does not have a spatial scheme," Reboulen said.
Industry experts have told SteelOrbis that steelmaker DeAcero owns the largest scrap company in Mexico with more than 20 collection yards. The second largest in Mexico, according to experts, is the scrap arm of the American Steel Dynamics, Omnisource.
The third largest scrap company is Dimeca (formerly Distribuidora de Metales y Cartones). Because it does not belong to any steel company, it is considered the largest independent scrap company in Mexico.
As Reboulen assured, Mexico is deficient in metal scrap. Data seen by SteelOrbis shows that the local supply of the input (generation minus export) is approximately 75 percent and the rest is imported. The market requires 12.5 million metric tons of metal scrap annually.
One point that caught the attention of a scrap market expert is that DeAcero is affected by the collection of scrap metal in the informal market (street collectors). Because they say that the bulk (around 65 percent) of the input comes from industrial collection and only a third of that market is obtained through peddlers.