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Asian and domestic producers compete for growing Mexican steel market

Asian and domestic producers compete for growing Mexican steel market

As Mexico’s consumption of steel increases, so does competition among a number of Asian, as well as domestic steelmakers such as DeAcero and Altos Hornos de Mexico with capacity in Mexico.  Both domestic and foreign  producers are vying to increase their market shares to serve the steadily expanding Mexican steel market.

Steel Thriving in Mexico

Due to trade agreements with dozens of countries around the world and a leading automotive manufacturing industry, the Mexican steel market has become quite the prize for both domestic and global producers. Several Mexican and foreign steel manufacturers with in country production capacity churn out tons and tons of the industrial metal to fuel this dominant manufacturing sector within the country.

Asian Companies Compete for the Mexican steel market

South Korea’s Posco was the first to invest big in the Mexican steel market, establishing a metal processing center there in 2007, as well as continuous galvanizing lines (CGLs) for the production of automotive steel sheets just two years later. While other Asian steelmakers were beginning to invest in Mexico, POSCO went on to now run two CGL facilities, five processing centers, and a technical service center, which services leading automakers like Nissan, Honda, Mazda, Volkswagen, and Ford.

Japan’s largest steelmaker, Nippon Steel & Sumitomo Metal, attempted to catch up by forming a joint venture with the largest steelmaker in the world, ArcelorMittal, to purchase a large-scale plant in Mexico just two years ago.

South Korea’s Hyundai Steel then struck back, with the construction of a steel service center in Mexico that is set to open in a matter of weeks. It will serve as an impressive automotive cold-rolled steel production base for supplying Kia Motors Mexico with cold-rolled steel sheets for use in an estimated 400,000 vehicles per year.

Additionally, several weeks ago, news broke of a competitive move by Japan’s second-largest steelmaker, JFE Steel. The company is planning a significant joint venture with US steelmaker, Nucor, to manufacture 400,000 tons of automotive steel sheets annually beginning in 2019. The companies will spend an estimated 30 billion yen on the joint venture, which is seen as a significant step towards dominating the Mexican steel market.

The Showdown

Mexican industries that consume steel, principally the burgeoning automotive sector, are the real winners as a the rivalry between Asia’s Japan and South Korea, as well as the country’s own leading producers such as DeAcero and Altos Hornos de Mexico, heats up. This set of circumstances  will  potentially lead to what some industry analysts are calling a pricing showdown. The Latin American country’s domestic steel industry, which feeds the Mexican  automotive sector, is seen as one of the world’s most prolific. As South Korean and Japanese suppliers compete with Mexico in the automotive sector, the resulting steel competition among the two Asian countries and Mexico’s leading firms ensures further growth for Mexican steel market production and use, as well as better pricing for consumers of the metal.

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This quarterly publication will be populated with content that is useful and relevant to readers that are contemplating Mexico investments, have operations already within the Republic, as well as to other individuals that have an interest in Mexico and its manufacturing sector.