Higher steel demand from North America nearshoring to come until 2025

Steel demand coming from new facilities being constructed in North America amid nearshoring trends is expected to materialize between the end of 2023 and 2025, Latin American steelmaker Ternium said on Wednesday February 15

The company intends on capturing that demand growth with new finished steel lines supplied by a new electric-arc furnace (EAF) to be installed in Mexico — the investment was announced late on Tuesday.

“We are thinking [Mexican steel demand] will continue to increase in the future, with growth over time. We are seeing all investments that our customers are doing… and we expect demand will grow for several years,” Ternium’s chief executive officer Máximo Vedoya said during a conference call with analysts to discuss full-year 2022 earnings on Wednesday.

New investments in capacity

Ternium said it will invest $2.2 billion in a new EAF and a direct-reduced iron (DRI) plant in North America with installed capacity of 2.6 million tonnes per year and 2.1 million tpy, respectively. The project also includes a port facility for raw material handling, it added.

The company is also investing in a new push pickling line, with the possibility of expanding cold-rolling and galvanizing capacity on site.

“This new demand from nearshoring will come in the long run, in late 2023, 2024 and 2025. So, in a couple of years,” Vedoya said. “We were able to make more steel products with the new hot-strip mill, and there is a certification process going on with industrial customers, which will be mostly completed next year,” he added.

Vedoya did not confirm where the new EAF and DRI plants will be located but said that “Pesquería would make sense” because it is close to the company’s newest facilities in Mexico. “The exact location will be disclosed soon,” he added.

Ternium started operations of a 4.4-million-tpy hot-rolling mill in mid-2021 in the city of Pesquería, in Mexico’s northern Nuevo León state.

Possibilities with new EAF

With the EAF, Ternium will make slab with an input ratio of 65:35 DRI to scrap, and the company assured quality would be the same as the semi-finished steel produced in its Brazilian operations, from two blast furnaces, especially for the automotive industry.

“Regarding costs per tonne, it’s difficult to say, depends on raw material costs… but with today’s slab market price of $700 [per tonne], costs would be around $550 [per tonne],” Vedoya said.

Fastmarkets’ latest price assessment for steel slab export, fob main port Brazil was $810-830 per tonne on February 10, up by $80-90 per tonne from $720-750 per tonne the week before and up by $150-190 per tonne from $620-680 per tonne a month earlier.

Mexican scrap prices, which will influence Ternium’s EAF input costs, have also increased recently.

Fastmarkets assessed the price for steel scrap No1 busheling, consumer buying price, delivered mill Monterrey at 9,400 pesos per tonne on Tuesday, a 4.44% weekly increase from 9,000 pesos per tonne and 12.57% higher than 8,350 pesos per tonne a month before.

The CEO also said the new EAF could allow for more slab sales to Usiminas, one of Brazil’s main flat-rolled steel producers — Ternium is part of its controlling group alongside Nippon Steel.

Ternium would have rolling capacity at around 7.5 million tpy globally and similar slab capacity but would continue to buy the semi-finished product from third parties and increase shipments to Usiminas, Vedoya said.

A previous plan of having two EAFs installed in North America could still be pursued in the future, the executive said. Capacity would, then, be larger than expected, because originally the two furnaces would be smaller than the 2.6-million-tpy one Ternium has chosen.

“We changed the configuration a bit, but, in the long run, we could fairly easily put a second [EAF to operate],” Vedoya said.

Near-term demand rising

In the meantime, the steelmaker has been enjoying a sales increase coming in part from import substitution in Mexico and also from weaker competition, according to Vedoya.

Altos Hornos de México (Ahmsa) has reportedly halted production for several weeks due to financial issues. This led customers to place more orders with Ternium and ArcelorMittal, Ahmsa’s main competitors in Mexico.

“Ahmsa is producing fewer tonnes, that much is true,” Vedoya said. “[But] right now we are gaining market share from imports, making our facilities work at much higher utilization rates,” he added.

According to the Ternium CEO, operations at the Churubusco facility — in the heart of Mexico’s industrial hub of Monterrey, 40 km away from the newest Pesquería hot-rolling mill — were intensified in light of more orders coming in, increasing capacity usage.

Felipe Peroni, in São Paulo, contributed to this report.

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