MONTERREY, Mexico Mexico will see a period of consolidation in its steel service center industry because too many new facilities are being set up in the country, a top executive in the sector said.
At least 10 new foreign service centers will be installed in Mexicos central area over the next few years, targeting the strong local automotive industry and manufacturing sector, Arturo Marroquín, general manager of Acero Prime S de RL de CV, said.
The new units will be working with low utilization levels because there are already several local service centers in Mexico serving the automotive and manufacturing industries, Marroquín said at AMMs 18th annual Mexican Steel Forum.
There are about 50 service centers in the country, according to Mexican steel distributors confederation Conadiac.
San Luis Potosí-based Acero Prime, one of the largest service centers in Mexico, has been working far below its installed capacity, Marroquín said last week.
Marroquín expects the new service centers to be working for four or five years at about 30 percent of their total processing capacity.
"The tendency is that these service centers will have to merge with other ones to survive. ... I have seen (in the past) some centers that arrived in Mexico and they were working for three years, but they were not successful and had to go back to the (United States)," he said.
"The issue is the (amount of steel) cutting equipment that will arrive in Mexico," Marroquín added. "Do we need (that) many (pieces of) cutting equipment?"
A version of this article was first published by AMM sister publication Steel First.