Steel giant Ternium announced this week it will build a new $2.2 billion mini steel mill to supply its deficit of more than 3.0 million metric tons (mt) of slab for its operation.
Slab is currently trading at approximately $700/mt FOB and at current raw material prices, the cost of operating production at the new plant would be $550/mt, said Maximo Vedoya, the company's CEO, in a meeting with investors.
“It's very difficult to provide a number because as you might expect some part of that depends on the cost of our raw materials. To put some numbers and I put the numbers that are today. Slab market prices are around $700 and the operating cost of this project if we take, today's numbers will be around $550. That's what I can tell you about the cost,” Vedoya said.
The CEO commented that considering the total production capacity in the plants located in the cities of Pesquería and Monterrey, in Nuevo León, Mexico and its plant in Argentina, the company needs between 7.5 and 8.0 million mt of slab and its production capacity in Brazil is 4.7 million mt.
A few days ago, Ternium announced that its board of directors has authorized the investment of $2.2 billion for the new electric arc furnace (EAF) steel mill with an annual capacity of 2.6 million mt. Capital that will also be used to build a direct reduced iron (DRI) plant with an annual capacity of 2.1 million mt and a port facility for handling raw materials.
The project could enter into operation in the first half of 2026. So far, the location for the new plant has not been reported. It was only mentioned that it will be in the USMCA region, which is a free trade agreement between Canada, the United States and Mexico.
The investment was authorized due to the potential greater demand for steel in the USMCA area, mainly from the automotive industry and other manufacturing companies that are coming to Mexico due to the relocation of companies from Asia to Mexico.
In Mexico, Ternium sells around 2.0 million mt of steel for the automotive industry. In this sector, the USMCA requires that by next July, the Regional Value Content (VCR) for vehicles and light trucks to have the tariff preferences of the trade agreement, as of next July the Regional Value Content must be 75 percent.
Some investors asked Vedoya about where the new steel mill will be. In this regard, the businessman said "we are discussing the exact location (...), we will reveal it soon."
Considering the logistics costs, an investor asked if it would be in Pesquería, Nuevo León, where Ternium began operations in mid-2021 with its hot rolling mill with a capacity of 4.4 million mt per year. He said that among the possible disadvantages of that place would be the scarcity of clean water and energy.
Vedoya replied that "Pesquería could be or one of the possibilities," however he immediately clarified that the company continues to analyze the location and "soon" they will make it known.
In addition, he said that Pesquería is a “very efficient” plant and that it does not consume clean water. He warned that water is a concern for the north of the country, but not for Pesquería.
He indicated that although energy "is a great concern in Mexico," for the north of the country, it is not because it has a greater energy supply than energy consumption.