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The sector faced energy supply shortages and theft of steel products during transportation at home, while overproduction in China weighed on international steel markets.
However, if the volume of complaints from local steelmakers are any gauge, then the biggest problem the country faced this year seems to have been alleged “unfair trade” practices from Asia, Europe and the USA, due to unilateral tariff reductions by Mexico’s former government.
Higher imports, lower output
Higher steel import levels from China, India and other places have contributed to a fall in Mexico’s steel production as they snapped a bigger chunk of the country’s rising steel consumption.
Crude steel production fell by 1.6% between January and October this year compared with the same period in 2011, according to the latest figures published by national steel association, Canacero.
Output totalled 14.9 million tonnes in the first ten months of the year while steel consumption increased by 13.7% reaching 20 million tonnes in the same period.
However, imports of steel products jumped 8.3 million tonnes, up from the 5.9 million tonnes reported in January-October last year.
Some 25-30% of these imports are from five countries outside the North American Free Trade Agreement (Nafta) – Russia, South Korea, China, Ukraine and Brazil, Canacero said.
More worryingly, Mexican steel executives claim that the unfair trade practices have caused some local prices to fall by up to 20% in 2012 on downward pressure from the cheaper, imported products.
In November, for example, hot-dipped galvanized coil (HDG) prices moved down in the Mexican distribution chain as a result of fewer sales in the domestic market and import pressure, according to market participants.
The unfair practices of some Asian and European countries, as alleged by Canacero and Mexican steelmakers, have increased during 2012, mainly due to the unilateral tariff reductions granted by Mexico’s former government.
“We are urging the new [federal] government to establish a long-term industrial policy, promoting both economic and employment growth, as well as energy, fiscal and trade reforms,” Canacero’s president Alonso Ancira Elizondo said in December after appointing Salvador Quesada Salinas as the association’s new general manager.
“Investments of billions of dollars made by the Mexican steel industry have been undermined by an uncontrolled growth of steel imports, many of them arriving to our country under unfair conditions,” he complained.
Steel investments will reach $15 billion over the next few years, according to Elizondo.
With this in mind, Mexico should form a “common front” with the United States and Canada in order to defend the steel industry against unfair practices from China and India, Elizondo proposed in September speaking to delegates at the 2nd Mexican Iron and Steel Conference in Cancún.
“Mexico should impose an import tariff against China of between 25% and 40%,” he told Steel First then.
The Mexican steel industry has also urged the country’s new government of president Enrique Peña Nieto to introduce a non-tariff way of stopping the imports of low-quality steel products.
Peña Nieto, of the Institutional Revolutionary Party (PRI), was elected in July and took office on December 1.
“Power returns to the PRI, a party that was not successful for 70 years, so there is a bit of uncertainty for many entrepreneurs. We will have to see what happens,” steel sources told Steel First recently.
For the next six years, Mexico should maintain a smart trade “under the premise that works carried out in our country should have a minimum local content of 60%, similar to the USA”, Canacero’s president warned.
Other problems that have been affecting the local steel industry include the shortages of natural gas fuel.
Mexico’s steel industry has been hit by “critical alerts” on natural gas consumption applied by state-owned energy company Petroleos Mexicanos (Pemex).
The number of alerts issued by Pemex has increased in 2012, with 36 alerts reported in the January-November period.
Only ArcelorMittal Mexico was affected by 22 “critical alerts” on natural gas consumption until September this year.
Steel theft has also affected the industry.
The total value of steel thefts from road transportation between the early 2010 and the middle of 2012 was about 600 million Mexican pesos ($46.8 million), according to Canacero’s figures.
Theft of steel from railway containers has also become a serious problem, amounting to about 650 million Mexican pesos over the same period.
Mexico’s steel industry shouldered both global and domestic challenges throughout 2012.