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What to expect for Mexican steel in 2025

Steel mills in Mexico plan for expansion amid economic challenges

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Mexican recycled steel prices could improve with short-term developments and growing demand. Davis Index

Steel mills in Mexico are developing new projects to expand production and shore up national supply chains. However, the macroeconomic environment will present headwinds for domestic steelmaking; here's a look at what's in store for 2025.

Mexico's geographical position has provided expansion opportunities, especially for domestic steelmaking. However, simultaneous challenges exist even though a slew of new steel manufacturing projects have brought about a nearshoring of investments. 

In recent years, Mexico has become a preferred export destination for China. The country is constantly looking at markets newer than the U.S. or the EU, which have stringent regulations due to the Carbon Border Adjustment Mechanism (CBAM). U.S. President Donald Trump has also hinted at potential 25 percent tariffs on Mexican steel and other products.

In the meantime, Mexican steel producers are working toward strengthening domestic production capabilities. New projects have been planned for the next five years (and some have recently been commissioned), as nearshoring is still expected to affect the manufacturing sector positively.

Ferrous capabilities look positive for the coming year

The outlook for 2025 improves as U.S. mills look to restock after subdued efforts to increase inventories in Q4 of 2024. These facilities tried to improve their financial performance during the last stretch of the year by increasing liquidity and paring down inventories, possibly leaving them with tight ferrous stocks headed into Q1 of 2025. A spur in U.S. domestic activity could have Mexico following suit to start the year.

Moreover, Mexican market participants have been bearish about recycled steel prices, a sentiment that continued throughout the end of 2024. Many point to international factors, such as weak demand in the EU for Turkish-finished steel and price reductions in Chinese and Russian billet, as fundamentals for a negative outlook in 2024 and for the U.S. exports market to continue softening.

Even with a generally cautious sentiment for Mexico's domestic ferrous prices, the country is gearing up for better steel production volumes. Here are the significant projects anticipated to come online in the next few years.

Gerdau to build a new steel plant in Mexico 

The company plans to build a new special bar quality steel (SBQ) plant in Mexico to better serve potential customers who are relocating their manufacturing from Asia to the U.S. market. The plant could begin production in 2025 and add 600,000 metric tons of annual steel production capacity to the three Gerdau plants in Mexico which already produce 1.5 million metric tons of steel.

Gustavo Werneck, Gerdau's chief executive officer, said the plant was contingent on pending commercial studies to determine viability. The company's North American steel production in Q1 of 2024 fell by 2.8 percent to 1.15 million metric tons from 1.18 million metric tons, although sequentially, it rose by 19.3 percent from 966,000 metric tons in Q4 of 2023.

DeAcero will invest more than a billion dollars into production

Steelmaker DeAcero is investing approximately $1.3 billion in a mill in Coahuila in northern Mexico. The facility will add nearly 1.2 million metric tons of steel production capacity to the company's current 1.5 million metric tons. It is expected to be completed by February 2026.

The new electric arc furnace will consume more ferrous material and use renewable energy. The mill will have a lower carbon footprint than its other facility and serve potential manufacturing clients setting up operations in Mexico.

At the same time, DeAcero invested $6.3 million in a smaller facility in Ciudad Juárez, Mexico, in the country's northern region. The site will be operated by its subsidiary Ingetek and could produce 4,000 metric tons of steel rods (rebar) and profiles annually. It will serve clients in the construction industry and export to the U.S.

In 2023, Raul Gutierrez, president of DeAcero, mentioned that renovation plans would also be done for company facilities in Saltillo in the state of Coahuila, and Celaya in the state of Guanajuato in the Bajío region.

New mill to expand Frisa's sales in North America

Northern steelmaker Frisa is expected to commission an SBQ plant in Monterrey by April 2025. In Q1, the company will be conducting tests at the site. Once online, the new mill will expand Frisa's sales outreach in North America and will have an annual capacity of 400,000 metric tons. SBQ production from the site will mainly target the aerospace market in the U.S. and Canada.

Frisa has also invested $200 million in acquiring a new rolling mill from Italian steelmaking equipment manufacturer Danieli. The project will expand the site's annual capacity by 71.4 percent to 600,000 metric tons, which is currently 350,000 metric tons. The project will be commissioned once the plant becomes operational in 2026.

ArcelorMittal will expand Michoacán facility 

Vertically integrated steelmaker ArcelorMittal Mexico also plans to expand its facility in Lázaro Cárdenas, Michoacán. Its flat steel production is expected to grow by 32.5 percent to 5.3 million metric tons from a current 4 million metric tons. The $1 billion project included a new pickling line with a 750,000 metric tons annual capacity, commissioned in 2023.

Ternium's expansion project to be complete next year

Latin American steelmaker Ternium is in phase three of an expansion protocol that started in 2010. The company is currently on the last phase, which is projected to end by 2026. 

The company expected fewer shipments in Q4 of 2024 due to seasonal effects. Still, it has a positive outlook for the Mexican automotive and industrial sectors in 2025 as the new government, headed by President Claudia Sheinbaum, settles in. Additionally, the company expects the ramp-up of its new pickling line to reap the benefits of the potential increase in steel demand.

Ternium's site in Pesqueria, Nuevo Leon, in northern Mexico, was commissioned in 2010. The current Phase 3 expansion plans include a new 550,000 metric ton hot rolling mill and five lines that will produce 600,000 metric tons annually of customizable steel. 

For 2025, an additional cold rolling mill with an annual capacity of 1.6 million metric tons is expected, along with a 600,000-metric-ton mill that will produce galvanized steel. Ternium's additional anticipated investment for the new approximately 2.6 million metric tons of production capabilities is about $4 billion.

Mexico’s geographical position has provided expansion opportunities, especially for domestic steelmaking. Davis Index

TYASA begin to serve several new industries 

In the eastern part of the country, Mexican steelmaker Talleres y Aceros (TYASA) broke ground on its SBQ mill in Orizaba, in Veracruz. The production facility, acquired from Danieli, will also add 350,000 to 400,000 metric tons of annual capacity to the site's already established 1.2 million metric tons. 

TYASA, along with other previously mentioned Mexican steelmakers, looks to serve the automotive, machinery, and construction sectors currently facing a shortage of high-quality materials. The SBQ mill is expected to become operational in Q3 of 2025.

Simec orders a new rebar rolling mill

Guadalajara-based steelmaker Simec has ongoing expansion plans for its Apizaco and San Luis Potosi sites. In December of 2023, the company ordered a new rebar rolling mill from the SMS group to provide an annual capacity of 500,000 metric tons. 

An explosion at the Apizaco, Tlaxcala, site in late October of 2024 halted melting operations. Traders in the Central and Bajío regions noted that the company released significant volumes of recycled steel into the market, lowering prices.

A new beginning for Mexico's steel industry 

Mexico's steel market guidance remains robust for 2025. President Claudia Sheinbaum's administration has stated that the presidency's economic program will focus on five key sectors to develop: semiconductors, electronics, medical devices, electric vehicles, and agroindustry.

However, infrastructure projects are also essential. One of them is the Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT) railway corridor in the southern part of the country, meant to complement the Panama Canal. Developments to shore up logistics for the auto sector in the Bajío and Central regions and the auto parts manufacturing industry in the northern border region are also considered.

Mexican recycled steel prices could improve with short-term developments and growing demand. In the very short term, prices are expected to rise in January 2025, along with U.S. price expectations, as mills on both sides of the border aim to stock up after holding subdued inventories in Q4 of 2024.

Ivan Lechuga is a ferrous market analyst with Davis Index, a market intelligence platform for ferrous, non-ferrous metals, and recovered paper. Ivan can be reached at [email protected].

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