2013-02-20 05:34:14 - New Materials market report from Business Monitor International: "Mexico Metals Report Q1 2013"
BMI's Mexico Metals Report for Q113 examines the competitiveness of Mexican steel and warns that electricity price hikes coupled with the appreciation of the peso are undermining the industry's competitiveness, both at home and abroad. The report examines the enormous long-term potential of the local steel industry and assesses the investment strategies of producers in a domestic market environment that offers considerable room for growth.
The Mexican steel industry's performance has been mixed over the last few years. In 2012, BMI estimates that steel production declined by 1.0% year-on-year (y-o-y), reaching 17.96 million tonnes (mnt) by the end of the year. In 2013, we expect that the steel industry will rebound and show positive growth of 9.5% on the back of
equally positive growth the heavy steel-consuming sectors of autos, construction and infrastructure, with huge invests planned for the latter in 2013. On the consumption side, we estimate that 2012 demand grew by 5.0% y-o-y, reaching 21.80mnt, and 2013 is forecasted to see 7.1% y-o-y growth, reaching 23.35mnt. We forecast average annual production growth over 2013-2017 of 4.9%, with average annual consumption growth over the same period growing by 5.9%.
Full Report Details at
With flat steel growth generated by the resurgent automotives sector, the main challenge comes in the longs segment. Growth of 4.1% is estimated for the construction sector in 2012, which should support domestic long steel production. In the long-term, the US$400bn investment under the second National Infrastructure Programme (NIP) over 2013-2018 should provide a sustained source of income for long steel, although Mexico has a patchy record of implementing infrastructural programmes on time. A further challenge will come from rising electricity prices. Given that approximately 70% of Mexican steel output is derived from electric furnaces, this trend is affecting profitability.
Over the last quarter, BMI has revised the following forecasts/views:
* We expect crude steel demand to continue its strong and steady growth of 7.1% in 2013.
* There is much to suggest substantial further peso strength over H212 and going into 2013, which would serve to make steel exports less competitive, and may provide some downside risk to the outlook for the steel industry.
* Looking further ahead to 2013, we expect a strong rebound as exports of manufactured goods pick up. An upward revision in the growth rate forecast for 2013, coupled with base effects, also supports a stronger performance. As such, we retain our forecast of 19.67mnt output in 2013, an increase of 9.5% y-o-y.
* Altos Hornos de Mexico (AHMSA)'s Fenix Project aims to increase the steelmaker's production capacity to 5mnt by the end of 2012, but BMI believes that the positive impact will largely be felt in 2013.
Report Table of Contents:
- Mexico Business Environment SWOT
- Table: Mexico - Steel Production & Consumption ('000 tonnes, unless stated otherwise)
- Table: Mexico - Steel Industry Historical Data ('000 tonnes, unless stated otherwise)
- Macroeconomic Outlook
- Growth To Slow In 2013
- Table: Mexico - GDP Contribution To Growth
- Steel To Average US$360/tonne In 2013
- Table: Steel Forecast
- Table: Steel Forecasts, 2008-2014
- Monthly Metals Update
- Iron Ore: Temporary Resilience
- Steel: No Sustained Recovery
- Aluminium: Resistance To Be Tested
- Copper: Chinese Stockpiles Present Downside Risk
- Lead: Range-Trade Ahead
- Nickel: No Return To 2012 Highs
- Tin: Continued Outperformance
- Zinc: Little Room For Optimism
- Table: Select Commodities: Performance & BMI Forecasts
- Table: ArcelorMittal - Key Financial Data
- How We Generate Our Industry Forecasts
- Cross Checks
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