Market Report, "Mexico Metals Report Q2 2014", published

From: Fast Market Research, Inc.
Published: Fri May 02 2014

We forecast strengthening Mexican macroeconomic fundamentals from 2014 through 2018 will lead to solid production and consumption growth of steel. We expect expansion of the automotive, manufacturing, construction, and oil and gas sectors, all of which rely on steel as an input, through our forecast period as the Mexican economy continues to recover from recent economic weakness. Still, domestic producers are likely to face pressure from foreign imports, given global steel market overcapacity, though recent import rule changes should curtail the impact of cheaper foreign steel.

We expect strengthening macroeconomic growth, driven by growth in Mexican industrial activity, automotive production, and construction, to drive Mexico's metals industry. Indeed, we forecast real GDP growth of 3.3% in 2014, an uptick from observed growth of 1.1% in 2013. In particular, we continue to forecast an upswing in growth on the back of strengthening consumer confidence in both the US and Mexico. Mexico's auto sector will continue to see investment and production growth given its exposure to the US, the world's largest autos market, and Latin America, which will see growing automotive consumption. Reforms to the country's energy sector lead us to forecast an uptick in oil and gas infrastructure investment and therefore increased consumption of steel used in pipelines and other equipment. We recognize the potential is large, and will thus monitor investment into the country's oil and gas industry, as well as a concurrent uptick in production and consumption trends, over the coming quarters.

Full Report Details at

We expect steelmaking to dominate Mexico's refined metal industry, with both domestic and foreign producers, particularly Altos Hornos and ArcelorMittal, leading. Though Mexican steelmakers have invested in iron ore production, they remain less reliant on iron ore revenue compared with Brazilian steelmakers. Given our forecasts for iron ore prices to average lower in 2014 and 2015, at US$115/tonne and US$105/tonne, respectively, Mexican steelmakers should thus be less exposed to falling prices and declining mine asset values. Asian, European and Brazilian producers will also continue investments into the country. We believe that recent government protectionist measures aimed at limiting illegal steel imports should help to boost domestic production. Both Russia and China have been the target of antidumping investigations in recent quarters, and recent regulatory action will put in place stricter oversight on imports, mandating importers to provide greater detail regarding the origin and value of a particular product.

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