NEW YORK A Mexican merchant bar supplier near the California border is changing the regional market by selling steel to end-users and fabricators, detouring around many of the Southwests traditional distributors.
The supplier, Aceros Corsa Ticoman, is the distribution arm for Mexican mill Aceros Corsa SA, which once supplied U.S. service centers in the region and now competes with former customers. The lower-priced imports, sold to service centers traditional customers in partial truckloads, have compressed margins for steel merchant bar distributors in Arizona, California and Nevada, sources said, and eroded the older distributors long-standing customer base.
"You have a Mexican distributor selling to the same people weve been selling to for years and their customers and then their customers, and its all gone," said a source at a steel service center in California. "Ive seen our market share shrink big time."
Mexican merchant bar prices have been very low in recent months, sources said, with a large increase in supply coming on to the market with the startup of Mexican long steel products producer Deacero SA de CVs new mill in March, softening prices and causing distributors like Ticoman to expand their customer base.
Aceros Corsas mill representative in the United States, Luciana Cordova, confirmed to AMM that Corsa subsidiary Ticoman has been selling to smaller customers. She said Ticoman was forced to do so because it is competing in a tight Mexican market with low-priced material and slim margins.
"Ticoman is selling to somewhat smaller customers than the mill sells to, so I anticipate the reaction from some of the larger distributors (in California) being somewhat negative," she said. "Deacaro has a new big mill and we know its going to (be a) tough few years for all the mills. New capacity in our market has been a problem. Everyones feeling it. Prices are very, very low in Mexico."
Service center sources said Ticoman has been soliciting and securing business from their customers for several years, but it has become worse with increasing shipments of Mexican merchant bars from other mills.
Deaceros new mill in northern Mexico has an initial capacity of 550,000 tonnes per year but will eventually produce 1 million tonnes of finished product, including merchant bar. The mill has been expanding its market share in the United States (amm.com, July 19), and several sources told AMM that Mexican 2 x 2 x ¼-inch angles are selling in a range of $640 to $700 per ton ($32 to $35 per hundredweight).
In addition to Deacero, U.S. buyers reported buying from Grupo Simec SAB de CV and Sigosa Steel Co.
Imports of Mexican steel angles with the harmonized tariff schedule code 7216210000one of several types of imported anglesincreased to 35,327 tonnes in the first six months of this year, more than triple the 9,746 tonnes imported in same period in 2012, according to U.S. Customs data.
Low pricing and increased volumes pushed Ticoman to search out new customers, sources said, selling daily in small bundles.
"Our biggest customers are now final users and not large service centers," Cordova said.
A source at a second service center in southern California that once bought merchant bar from Aceros Corsa said Ticoman was targeting his customers. "This is happening on a daily basis. They sell below Nucor (Corp.) list prices ... 2 x 2 x ¼-inch angles are around $37.65 per cwt plus freight and surcharge; around 41 cents per pound delivered. Right now, Ticoman is offering 38 cents delivered to your door. If we were talking about a fair business, we should be selling this material at between 46 and 50 cents per pound. We used to sell at that price," he said. "Right now I need to buy import material so I can compete against them."
"They go to a lower level than anyone has gone at this point," a third service center source said. "They really are selling one, two or three bundles at a time with two- to three-day delivery and undercutting the larger distributors that are trying to keep up with them."
Cordova said Ticomans prices are as "high as they can (be). We dont have a lot of margin so we try to maximize through price. It does make me upset that other people are saying this. We are a responsible player and we always have been."
Cordova said Ticoman is currently selling merchant bar at higher prices than the Mexican mills selling directly into the United States, which the second service center source confirmed.
Gerdau SA has a 49-percent joint-venture stake in Aceros Corsa, Ticomans parent company.
"Gerdau seeks to have relationships of mutual respect with all its stakeholders and, therefore, as a policy the company does not compete for customers of its customers, either directly or through its distributors in all countries where it operates," a Gerdau spokeswoman told AMM. "Regarding Aceros Ticoman, Gerdau reiterates that this company exports small volumes throughout Latin America, the Caribbean and the United States, which has its own traditional customers."