SÃO PAULO Latin
American steelmaker Ternium SA might choose to expand its crude
steel capacity in Mexico following its exit from the sale
process of ThyssenKrupp AGs 73.13-percent stake in the
5-million-tonne-per-year Cia. Siderúrgica do
Atlântico (CSA) slab plant in Brazil.
A divergence between Ternium and
ThyssenKrupp on the "value perception" of CSA, coupled with the
challenging situation of the steel industry, has pushed Ternium
out of the bid process for the Brazilian slab mill, chief
executive officer Daniel Novegil said this past week (
amm.com, May 1).
An acquisition of CSA would have
given Ternium self-sufficiency in the supply of slab.
Currently, the company buys around 3 million tonnes per year of
slab from third parties to feed its flat-rolling facilities in
Mexico, where it is able to produce as much as 6 million tonnes
per year of flat steel products but only 2.3 million tonnes per
year of slab.
In order to fulfil its slab
needs, Ternium might now decide to increase its crude steel
capacity in Mexico, Novegil suggested.
"We have been talking with some
of you in the past about maybe adding some capacity in Mexico
through the DRI (direct-reduction iron) route," the executive
said during a conference call with analysts April 30.
"Expanding our vertical
integration in Mexico is always something that we have among
our options and priorities, so well continue analyzing
that option," he added.
Novegil said that Ternium will
have "something more in detail to share" with the market during
the companys investor day at the end of June.
In February, Novegil noted that
Ternium had two options to address its slab purchase issue: "to
go for CSA" or to build a greenfield operation in Mexico.
A third option would be the
construction of a greenfield slab plant in the industrial area
of the Açu Superport in Brazils Rio de Janeiro
state. But Ternium recently wrote down its previous expenses on
the Açu project due to delays related to natural gas
supplies and Anglo American Plcs Minas-Rio iron ore
project, which would feed the slab unit.
"In the fourth quarter of 2012,
we wrote down the property plan agreement related to the
development of the Açu project. This was done mainly as
a result of lack of availability of natural gas in the area,"
Novegil said this past week. "Also, we had an important iron
ore delay and investment overruns in Anglo Americans
Minas-Rio project, so taking all of this into consideration ...
we decided to write down the property plan agreement."
With the exit of the CSA sale
process and the write-down in Açu, a decision about a
possible crude steel expansion in Mexico will become even more
crucial as the company is close to commissioning a 1.5
million-tonne-per-year greenfield cold-rolling mill and a
400,000 tonne-per-year hot-dipped galvanizing mill in
As a result, the gap between its
slab-making capacity and finished steel production will
increase even further.
The galvanizing milla
joint venture with Japans Nippon Steel & Sumitomo
Metal Corp. (NSSMC) called Tenigal SRL de CVis expected
to come on stream in August this year. The cold-rolled mill
will also become operational in the second half of the
Located in Pesquería,
Nuevo León state, both mills are part of a project that
was originally to begin with a DRI unit, a steelmaking
operation and a 2 million-tonne-per-year hot-rolling mill.
After the economic crisis,
however, Ternium decided to reconfigure the project and develop
it "backwards" by starting it with the galvanizing and
cold-rolling mills. But the plans to move upstream into steel
hot-rolling, slab and DRI always remained on Terniums
The company could choose to
install a bigger slab-making operation than originally planned,
so that slabs would feed both the Pesquería finished
steel facilities and Ternium Mexicos existing 6
million-tonne-per-year rolled capacity.
The steelmaker, however, might
not be in a hurry to decide on a slab expansion since it
currently enjoys a "strong" base of slab suppliers in the
world, Novegil said.
"I dont see any problems
in the procurement of slabs for our operation in Mexico coming
from our current sources," Novegil said in the same conference
call this past week.
Ternium ships slabs to Mexico
from its Argentinian mill, Ternium Siderar, which in March next
year will put into operation a new slab caster, initially
increasing capacity by 500,000 tonnes per year. It also buys
slabs from Brazil and from ArcelorMittal Méxicos
Lázaro Cárdenas mill.
"And also we had the ability
last year to develop a very good Russian supply," Novegil
"Our supply base is strong now and I dont expect it to
change in the short run, and I guess that well be able to
continue enjoying this supply in the medium run," he added.