In this presentation at the 53rd annual meeting of worldsteel (World Steel Association) held in Monterrey, Mexico, this week, Guillermo Vogel, a Mexican businessman who is vice-chairman of Luxembourg-headquartered steel pipe and tube producer Tenaris, gave an overview of the Mexican steel industry. He began by giving some of the political backdrop to the current situation in Mexico, commenting on the presidential election held in July 2018 which leftist Andres Manuel Lopez Obrador won with 53 percent of the vote. His main issues during his campaign were elimination of corruption, reduction of inequalities in the country, emphasis on spending on infrastructure and a very strong message that growth has to be inclusive. He has a strong mandate and with control of congress a lot of flexibility, Mr. Vogel noted. Traditionally, he said, Mexico has been more developed in the north and poorer in the south. He commented that growth in Mexico was more even throughout the country until 1994, when NAFTA entered into effect, which he said created more inequality because investments were mainly concentrated in the north and center of the country. The new government is bringing about a lot of changes, he remarked, adding that it discovered $800 billion of fraud in invoicing from 2014 to 2019, while there was also a big problem to be dealt with regarding the stealing of gasoline from pipelines. The decision was made to implement much stronger laws in terms of penalizing these things. The president also reduced his salary and decreed that public sector officials could not earn more than he did. One of the main challenges facing the new government is how to grow with equality, Mr. Vogel said, adding that in many countries there may be good growth, but then at the same time the middle classes are getting smaller and the poor classes are increasing. There are very strong arguments in terms of saying that the total market concept - the neoliberal concept - is really not the solution, and that total government is not the solution either, while more and more it is being said that what you actually need very much is interaction, sectorially based between the private and public spheres, in order to really define sectoral policies or regional policies, to really generate growth.
The Tenaris vice-chairman said that the Mexican steel industry is in a very good position in terms of social responsibility, engaging in terms of the environment, supporting communities, investing in infrastructure, while adding that they have formed a regular committee within the government in order to promote inclusive growth in the country.
Giving a snapshot of the current situation in the Mexican steel industry, Mr. Vogel indicated that Mexico is the 14th largest steel producer in the world, with steel in Mexico representing 2.0 percent of national GDP, 6.9 percent of Mexico’s industrial GDP and 12.9 percent of its manufacturing GDP, employing 672,000 people directly or indirectly. In terms of emissions, helped by its preponderance of electrical furnace-based steelmaking, the industry is below the average in terms of CO2 emissions and above the average in its recycling of water. It is the country’s number one consumer of natural gas and number two consumer of electricity. Looking at the locations of Mexican steel facilities on the map of Mexico, he noted that the industry participates in the situation of inequality in the country because it is absent from the south with just two exceptions. He went on to say that the industry has to see how it can start to support the south, and this is one of the issues on which it is pushing very much, while infrastructure will also be needed.
Continuing his presentation, Guillermo Vogel said that one of the sectors which has been particularly hit in Mexico is construction. Looking at the Mexican steel industry in the January-July period of the current year compared to the same period of the previous year, steel production is down 11.2 percent, steel exports have declined by 15.3 percent - “very much related to Section 232” he commented, while steel imports have risen by a slight margin of 1.2 percent. A major contributing factor to this situation is the contraction in steel-using sectors during the given period, with construction in particular down 4.5 percent, and the automotive sector contracting by 0.7 percent. However, demand in the construction sector is expected to be reactivated with the implementation of social projects, while auto vehicle exports have already begun to rebound in 2019 and auto production is foreseen to increase in the short term, he noted. Meanwhile, the slowdown in the global economy has also affected the development of the domestic steel industry. “The main thing affecting the economy today has been the change of government and the adjustment to the new government. And the way that we see it is that we are still going to have another tough 12 months,” he remarked. In the January-July period this year, apparent steel consumption is down six percent year on year, it is expected to improve before the end of the year but a difficult situation is still anticipated, he said. Looking at Mexico’s steel imports in the January-July period this year, the US is seen to be the main supplier with 33 percent, followed by South Korea, Japan and China supplying 19 percent, 17 percent and six percent respectively. Mexico has a 15 percent safeguard on imports of steel from those countries with which it does not have free trade agreements (FTAs), and so the countries with which it does have FTAs have benefitted in terms of exporting to Mexico. On the export side, Mexico mainly exports its steel to the US market, but these exports were down 15.3 percent year on year in the January-July period this year. After the impact of Section 232, Mexico now hopes to recover its historical export levels to the US.
Finally, as regards the United States-Mexico-Canada Agreement (USMCA), Mr. Vogel viewed mid-November or early December as possible dates for its ratification by US Congress, though adding that the chances of its being approved will decline if ratification is not carried through in this period.