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Mexico Metals Report Q3 2009Published by: Business Monitor International Published: Aug. 7, 2009 - 42 Pages Table of Contents
AbstractThe Mexican metal industry is facing a very difficult environment both at home and in export marketsdue to the downturn in construction and the automotive industry, but BMI’s latest Mexico Metals Reportforecasts strong growth in the long term, with the country likely to retain its position as the majorsteelmaking base in the Western Hemisphere outside the US.In the first five months of 2009, Mexican crude steel output fell 38% year-on-year (y-o-y) to 4.92mntonnes. The fall in output came after a rapid slowdown from September 2008, with output down byaround 25% y-o-y in Q408. While the steel industry was reporting a modest uplift in orders in Q209,BMI is not convinced the trend will be sustained and turn into a full-fledged recovery. Prices had notrecovered across the board, but had instead showed signs of bottoming out. The greatest area of concern is in the flats market. Half of Mexico’s hot-rolled output is dedicated to flatproducts, which are suffering as a result of the collapse in the North American car market. Mexican carproduction volumes fell by 41.7% y-o-y in the January-May period, while auto exports declined by 41.5%y-o-y and car sales dropped by 30.6% y-o-y. With the car industry operating at just 25% capacity inH109, aluminium and steel product demand from the automotive industry has plummeted. Meanwhile,the country’s steel pipe industry is also suffering the effects of the financial crisis, with sales value down60% y-o-y in H109. The domestic market is providing no relief for Mexican producers, with a severeeconomic downturn that BMI expects will lead to a 5.5% contraction in GDP. The economic crisis has put Mexico’s hopes of securing a higher rate of growth over the medium terminto jeopardy, and there are lingering uncertainties over whether it will meet the target of 32mn tonnes perannum (tpa) by 2020. Mexican production capacity is expanding, yet domestic demand in Mexico forcarbon and stainless steel sheet is falling. BMI estimates that apparent steel domestic consumption fell4.6% in 2008 to around 17mn tonnes. We forecast a further 30% drop to around 11.9mn tonnes in 2009 askey consuming industries have ground to a halt. The decline in steel demand is related to the decline inMexico’s production of automotive and white goods as well as the contraction in mining, manufacturingand construction. Service centres have responded to the collapse in end-customer demand by cuttinginventories and sharply reducing orders from mills. The upshot of recession will be a 35% fall in hot-rolled steel output to just 9.75mn tonnes, with crudesteel down 34% to 11.66mn tonnes. Rebar is set to fall 32% to 2.39mn tonnes and tubes and tube fittingswill fall by a similar amount to just under 807,000 tonnes. However, BMI anticipates a strong recovery inoutput from H210, in line with a recovery in demand and rapid expansion of capacity. By 2013, crudeshould exceed 22mn tonnes, an increase of around 27% over 2008 levels. A large amount of Mexicancapacity is due to come onstream in coming years, but BMI does not believe the domestic market willrecover fast enough to absorb the extra output. It is widely expected that the Mexican industry will faceless inflation pressure and better prices for raw materials than seen in 2008. While Mexico still has plentyof domestic growth potential (BMI forecasts 2013 apparent finished steel consumption of 18.22mntonnes, an increase of 7.6% over 2008), the recovery will be strongly led by exports as the country makesthe most of a post-recession scenario where significant amounts of US steelmaking capacity arepermanently taken offline. Get Full Details About This Report >> |
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