Economic analysts concerned about Mexican steel industry

Wednesday, 10 June 2015 02:01:13 (GMT+3)   |   Monterrey

The growth of Chinese imports and the fall in raw material prices threaten the operation of steel factories in Mexico, said José Luis de la Cruz, director of the Institute for Industrial Development and Economic Growth (IDIC), who outlined a scenario of economic contraction in Mexico and strong unfair competition from imports, mainly from Russia and China.

"Most companies in the sector are doing or have done both investment adjustments in labor along these first months of the year," he said.

Even before this debacle, ArcelorMittal headed the national steel production with 24 percent of total production, while companies AHMSA, Ternium Mexico, Deacero and Tamsa concentrated 61 percent of national production.

Last March, the plant in Lazaro Cardenas ArcerlorMittal interrupted activities and asked the Ministry of Economy to establish temporary tariffs for 12 months, to continue operating.
AHMSA will lay off 4,500 people, while Deacero halted operations in Saltillo, injuring 500 people.

With this cut modernization projects stop at the hot rolling process, standardization, value-added thermoformed and iron mines, said Francisco Orduna, a spokesman for AHMSA.

However, Isaac Velasco, an analyst with financial group Ve por Mas (Bx +), described as a scenario unviable tariffs on steel imports. This because of increased demand from the automotive and construction industry.

"This increase import tariffs would probably mean increased costs for this sector and this uncompetitive Mexican automotive exports," he said.

Meanwhile, China's imports of steel products to Mexico are gaining ground.

From January to April 2015, Chinese imports of rolled products to Mexico increased 104 percent over the same period last year, according to the Latin American Steel Association (Alacero) to buy 434,000 tons.

The volume of purchases from China comprise a variety of rolled products, such as bars, wire rods, structural shapes, rails, leaves, rolled coils and seamless pipes.

Chinese factories are not intended to shut down its production despite the global overcapacity of 570 million tons of steel in the world. Domestic steelmakers complain that the advanced Asian imports is being conducted under unfair trade practices.

According with the Mexican Chamber of Steel (CANACERO), purchases of Chinese rolled steel from Mexico during the first four months of the year increased 104 percent, and 31.2 million tons of rolled steel exported to the world China from January to April 2015.

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