Canacero denies risk of steel shortage due to Mexican steel import tariffs increase

Mexico's recent increase in steel import tariffs to 25-35% won't cause shortages in the supply chain, with the market expected to be fed by imports from partner countries and growing local capacity, Mexican steel association Canacero told Fastmarkets on Wednesday May 15

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“Mexico is completely open to many countries with which we have healthy commercial conditions, meaning there is no risk of shortages,” Canacero said in a written statement.

The association also highlighted that there is production and development of capacity to increasingly supply the Mexican steel value chain.

“In recent years, the industry has made necessary investments, which reached $5.4 billion during the current six-year term [that ends in 2024], in addition to another $5.7 billion announced for next years,” Canacero said.

In 2023, imports of finished steel products reached 12.5 million tonnes, which represents an increase of 21.3% compared with 2022, and took a 44% share of domestic consumption, according to Canacero’s data.

“In the US, for example, imports barely represent 21.3% of its consumption,” the association said.

Mexico’s steel imports reached record levels after the country’s largest flat-rolled steel producer, Altos Hornos de Mexico (Ahmsa), declared bankruptcy and closed its doors in 2022, Felix Bello, Fastmarkets’ US steel analyst, said.

As a result, the duty increase adopted in April tends to primarily affect those products that Ahmsa manufactured and that were replaced by imports, such as plate, tinplate, and hot- and cold-rolled coil, according to Bello.

“Particularly plate and tinplate, for which Ahmsa was the sole producer,” he said.

Fastmarkets’ analyst also pointed out that Ahmsa is in a conciliation period with its direct creditors for a restructuring agreement, with hopes of restarting production by the end of 2027.

“As the plan progresses, Mexico will be able to meet most of its domestic steel demand without such largest import level,” Bello said.

Higher import duties

Mexico decided to increase import tariffs on several goods, according to a decree that came into force on April 22. The new tariffs range from 5-50% for products such as paper, aluminium and others.

Before the measure, Canacero said that 205 Harmonized System codes for steel products were subject to an average 21% import tariff. After the decision, 242 product codes of interest to the steel industry reached an average tariff of 30%, which will contribute to combating “subsidized, undervalued and dumped steel” and will reinforce national industry competitiveness, Canacero said.

“The tariff measure represents a clear response from the government of Mexico [in favor of] the idea of producing more steel in the region, versus imports [made] under unfair conditions, [an idea that] benefits the national and regional industries,” the association said.

Among steel products, the tariff for HRC and CRC was established at 25% with the new measure, while duties for profiles, coated material, rebar, wire rod and tube were set at 25-35%, depending on the specification, according to the decree published on the Mexican Federation official gazette on April 22. The government, however, did not specify what the previous tariffs were for any of the products.

Since last year, the US has been requesting greater transparency in regard to Mexico’s steel and aluminium imports from third countries, as a way of understanding the trade flows of countries that are part of the United States-Mexico-Canada free trade agreement (USMCA).

The recent duty increase applies to all countries with which Mexico does not have a free trade agreement. The country has treaties signed with the EU, Vietnam, Malaysia, Australia, Canada and the US.

“Mexico’s tariffs increased for countries outside without a free trade agreement with Mexico and is twofold; it primarily encourages imports from Canada and US to support the growing near- and on-shoring investment and discourages imports from other countries,” Bello said.

According to Canacero, some examples of countries with which Mexico does not have trade agreements and that will be affected by the higher tariffs on steel are China, South Korea, India and Turkey.

Effects on prices

The Mexican steel association does not comment on issues related to price, but said it sees no chance of product scarcity due to the tariffs increase. But a source related to the Mexican scrap market heard that the measure could affect prices in the automotive sector.

“Some manufacturers were buying coil from China for automotive stamping, and the government’s decision would bring a change in prices for them,” the scrap source said. “If the scrap is generated from a raw material with a new duty or if manufacturers cannot replace the raw material, this will result in an increase in the final price of scrap too,” the source added.

While the consumer goods sector expressed concerns, Mexican steelmakers have celebrated the measure. For example, Maximo Vedoya, chief executive officer at Ternium, referred to the tariff increase as an important development for Mexico and a “positive example” for other countries in the region.

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