The similarities that exist in the Mexican and U.S. markets
for steel-and the challenges they are facing-are stark and
profound. There is little argument that what affects the U.S.
market for steel products has a direct impact on Mexico in
almost every aspect, from demand to consumption to production
to trade-related matters.
Those similarities and the strategies now being employed to
meet the challenges brought to the industry by the global
economic crisis were the key focus of AMM's 14th Annual Mexican
Steel Conference in Monterrey. The conference took an in-depth
look at the challenges through the eyes of experts from both
sides of the border.
What transpired during the conference, which ended with
plant tours of nearby facilities operated by Whirlpool Corp.,
Benton Harbor, Mich., and General Motors Corp., Detroit, was a
historical perspective of how the markets have developed,
followed by a brisk exchange of ideas on how economic and trade
factors are impacting both steel producers and consumers in the
United States and Mexico.
It was noted by several experts that long-standing problems
remain in play. Some of them are specific to border-crossing,
with a panel of transportation, trade and logistics experts
explaining that tedious paperwork issues continue to delay
shipments at the U.S.-Mexican border.
There are signs that some help finally may be on the way.
Gloria Ballesteros, senior vice president of sales, marketing
and asset management with the Kansas City Southern de Mexico
railroad, said her company is investing heavily to improve
infrastructure along its rail lines between Monterrey and
Chicago and has purchased new locomotives, all aimed at
improving the flow of goods. And Ricardo Arias, trade
development manager with the Port of Houston Authority, said
the port is in the midst of a significant expansion project in
which bays and cranes are being modernized and other steps
taken to improve access to the port for most goods, including
The tone for the conference was set largely by two highlight
speakers who opened the proceedings. P.S. Venkat, chief
executive officer of ArcelorMittal Mexico, told the conference
crowd of about 250 that the Mexican government had put out a
call to all steelmakers in the country to work jointly with the
government to overcome the impact of the global economic
He said the government and industry must continue to work
together to generate wealth through work and investment, noting
that Mexican President Felipe de Jesús Calderón
Hinojosa had urged government and industry to join forces where
possible to spark infrastructure development and a trickle-down
to increased steel consumption. Public investment in Mexico has
been focused largely on urban initiatives and housing
development, he said, and while those issues remain critical,
infrastructure development and the need to battle unfairly
traded imports remain key areas of focus for the steel
Howard Booth, managing consultant at Hatch Consulting,
Pittsburgh, told delegates that the U.S. economic stimulus
package is a positive for both the U.S. and Mexican steel
markets, given the closeness of the economies of the two
countries. He warned, though, that economic stimulus is
unlikely to translate into immediate steel demand.
Booth said that while steel production is expanding in
Mexico, home-market demand is sliding as auto and appliance
output has declined. There is considerable economic uncertainty
in Mexico, and tight credit is forcing a re-evaluation of
construction projects and durable goods purchasing programs. As
Mexican demand slows, it creates the potential for more steel
exports to Canada and the United States, but buyers in those
countries don't need additional supplies.
As regional economies in Mexico plunge, sales of new,
Mexican-built vehicles "will mimic trends in the United States
and Canada and cause assembly cutbacks," Booth said, noting
that Mexico also continues to battle inefficiencies in shipping
logistics and the supply chain that make transportation of
goods between Mexico and the United States more costly.
Sandy Simon, vice president of business development at
Pacesetter Steel Service Inc., Atlanta, presented a historical
perspective dating back to 2001 showing recent cycles of steel
price, consumption and demand and said that while events
surrounding this downturn are different, the results are
He offered the perspective of an American steel buyer
looking to do more business with Mexico, pointing out that the
most recent cycle, which began in late 2007, saw hot-rolled
sheet prices in the United States jump from about $560 per ton
at the end of the year to around $1,100 per ton by last August.
Demand then quickly fell off, sending prices plummeting to
current levels of close to $520 to $530 per ton, and stock
prices for steel companies-like U.S. Steel Corp., Nucor Corp.
and AK Steel Corp., among others-followed suit. "That left us
in the chaos we're in now, but we've been there before," Simon
From the perspective of a major Mexican steel buyer, steel
producers in the country are letting opportunities slip away,
especially with regard to the use of high value-added steels.
Carlos Barajas, global commodity director of steel global
procurement operations at Whirlpool, said his company would
like to buy more from Mexican mills but is forced to look
elsewhere because many of the country's steel mills have chosen
not to participate in the appliance market, which consumes
higher-end steel. "I feel some of the mills just don't want to
sell to us. We have to import some material because we don't
find it in Mexico."
Barajas said Mexico is a low-cost producer with many
advantages, such as availability of raw materials, qualified
people, proximity to the United States and a closer business
culture to the U.S. and Europe than many Asian competitors, and
yet Mexican producers have failed to take advantage of their
"Why do you (the Mexican steel industry) let Taiwan and
South Korea take over the market for high-end steel?" he asked,
noting that while Taiwan and Mexico have similar levels of
steel production, Taiwanese exports of cold-rolled and coated
steel outnumber those from Mexico by a factor of eight to