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‘Assessor’ could cut steel overcapacity: Ahmsa

Keywords: Tags  Alonso Ancira Elizondo, Ahmsa, Altos Hornos de México, steel, overcapacity, Steel Success Strategies XXVIII, Lisa Gordon

NEW YORK — Steelmaking overcapacity could be addressed by an independent group that would assess which mills should be shuttered on the basis of national need and company performance, the top executive of Mexico’s largest integrated steel producer proposed.

"We need to be creative and work going forward to stop overcapacity," Alonso Ancira Elizondo, chairman of Monclova-based Altos Hornos de México SAB de CV (Ahmsa), told a packed room at the Steel Success Strategies XXVIII conference in New York sponsored by AMM and Englewood Cliffs, N.J.-based World Steel Dynamics Inc.

"We need an international (assessor) we can hire to see who needs to cut production" and decide which companies should close based on an analysis of each steel-producing country and independent steelmaker, Ancira Elizondo said. "Global steel has come and it is going to stay, and we need to find solutions."

He estimated that between 200 million and 350 million tonnes of steelmaking could be eliminated worldwide. Under Ancira Elizondo’s proposal, facilities that are obsolete, inefficient or not environmentally responsible would be told to close. Governments could be involved by lobbying for a global legal framework to address overcapacity concerns.

Ancira Elizondo said that North America is not suffering from overcapacity. "The United States, Mexico and Canada only have an imbalance of 3 million to 4 million tonnes," he said, and Mexico is actually experiencing a steel deficit. Mexico produces 20 million tonnes of steel, imports 7.1 million tonnes and exports 5.9 million tonnes—mostly slab sent to the United States—annually, he said, estimating the country’s deficit at 1.9 million tonnes.

An undeveloped shale gas industry and new government support in progress will drive new and improved opportunities for the metals industry, Ancira Elizondo said. "This is a country of opportunity. We have favorable financial conditions (and) a healthy banking situation, and (we) can support the economy, which has huge potential for accelerating growth." The Mexican economy is expected to grow 3.5 percent this year, 5 percent in 2014 and 5.5 percent in 2015, he said.

The steel industry accounts for 2.6 percent of the country’s gross domestic product, Ancira Elizondo noted. Mexico has its own shale gas reserves, but the country has not begun to develop the wells as in the United States. Private investment in energy has not been available for 50 years, he said, but the Mexican government is working to reform tax and energy investment policies in order to attract investment.

Ancira Elizondo noted that the U.S. and Mexican economies cannot decouple from one another. "Everything we do is like playing at the same poker table, and we are going to reach $1 trillion in trade in the next three or four years," he said. "This is good for both of us."

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