Mexico's Steel Sector Driven by High-Strength Grades for Auto Manufacturing

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Mexico's apparent domestic steel consumption (production plus imports, minus exports) was up 15.3% in 2012 at 24 million tons, compared with the 2011 total of 20.87 tons. The Mexican Chamber of Industry Iron and Steel planning commission's forecast for steel consumption in 2013 is 25.18 million tons. This would see the achievement of the optimal levels last seen during 2006 and 2007 with more than 25 million tons.

The commission said that production could be strengthened further if the new government responded to the demands of Mexican industry by increasing the domestic content requirement in the procurement and allocation of the public sector and parastatals. The push is for a minimum of national integration of 60%. The steel sector has investment plans estimated at $11 billion.

Mexican steel production fell 0.7% at the end of 2012 to 17.97 million tons, compared with 18.1 million tons in 2011. The production forecast for 2013 is between 18.64 million and 19.34 million tons, driven mainly by the industry's investments to expand its market share in sectors such as automotive manufacturing. This is a sector in which the domestic industry is highly competitive on a global scale; another such area is that of hot rolled products with new grades, dimension and specifications.

The behavior in apparent domestic consumption of flat steel in Mexico during the last two years, and the forecast for 2013 is attracting keen interest, according to SteelOrbis. Domestic consumption of hot rolled coil grew 18.5% to 3.56 million tons; in 2013, it is forecast to reach 3.75 million tons, up 5.2%. Cold rolled coil consumption is forecast to grow 8.4% to 3.39 million tons.

Last week, automaker Volkswagen (PINK:VLKAY) (Wolfsburg, Germany) announced that it plans to manufacture its top-selling Golf hatchback in Mexico. The company is using more high-strength steel, quadrupling that used in the Golf. Volkswagen's innovative use of steel has uncovered ways to reduce weight without the use of expensive materials such as aluminum and carbon fiber.

Volkswagen plans to sell 1 million vehicles in the U.S. by 2018. The company hopes to overtake General Motors Company (NYSE:GM) (GM) (Detroit, Michigan) and Toyota Motor Corporation (NYSE:TM) (Tokyo, Japan) as the world's largest automaker by sales. Volkswagen plans to invest more than $5 billion in North America over the next three years, including a new Audi plant in San Jose Chiapa, Mexico.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.