SDI’s Millet: AHMSA situation benefits prices in Mexico and the US

Monday, 30 January 2023 01:25:48 (GMT+3)   |   San Diego

US-based steelmaker Steel Dynamics, Inc. (SDI) expects to benefit from the paralysis of production of the Mexican Altos Hornos de México (AHMSA, both from the prices of the regional markets of Mexico and the United States, according to SDI’s CEO Mark Millett.

“This market’s strength is clearly supporting market price appreciation, and in particular, the challenges with AHMSA in Mexico, it’s certainly changed the regional markets and Mexico, tons of standing Mexico and the U.S. market is certainly benefiting from that,” Millett said in a press release.

Millet said that the greater demand for steel translates into better prices; he even warned that the order book runs through the first half of 2023.

In the last days of November, the state Federal Electricity Commission (CFE) suspended AHMSA’s supply of electricity due to non-payment. Restoration of service took almost two weeks. In the first week of January, the state-owned Pemex suspended the supply of gas.

Industry experts point out that in the face of price increases from mills in the southern United States, buyers turned to Mexican producer Ternium to buy steel at a lower price. However, with AHMSA's exit from the market, Ternium’s supply to US buyers has been limited.

AHMSA has a production capacity of 6.0 million metric tons. Considering the paralysis of the company since January, due to the supply of gas, the company stopped producing more than 400,000 mt.

According to press reports, not confirmed by the company, in the first half of February there will be news about a capital injection for AHMSA, which is technically bankrupt. As of September 2022, total assets (at today's exchange rates) were $2.24 billion and total liabilities were $2.90 billion.

That level of liabilities of the Mexican company endangers more than 10,000 direct jobs at the Mexican steel company.