DOW JONES22,123.52+486.74 2.25%
S&P 5002,607.42+65.95 2.60%
NASDAQ7,724.16+221.78 2.96%

Coronavirus Linked To 15.9% Drop In Mexican Steel Production In January

Two U.S. steel companies recently announced they were expanding in Mexico through acquisitions and facilities upgrades. The investments come despite recent drops in Mexican steel production related to the coronavirus.

Benzinga · 03/03/2020 14:46

Two U.S. steel companies recently announced they were expanding in Mexico through acquisitions and facilities upgrades. The investments come despite recent drops in Mexican steel production related to the coronavirus.

Wisconsin-based Maysteel Industries is expanding sheet metal fabrication operations in Monterrey. The company's new 200,000-square-foot campus in Monterrey will feature a streamlined layout designed around optimizing material flow.

Indiana-based Steel Dynamics Inc. announced on Monday it is acquiring Zimmer, a Monterrey-based recycling business. The acquisition will support Steel Dynamics' new flat roll steel mill being developed in Sinton, Texas.

"We look forward to welcoming Zimmer to the Steel Dynamics family to further solidify our Southwest U.S. and Mexico growth strategy," Mark D. Millett, president and CEO of Steel Dynamics, said in a release on Feb. 26. "Combined with our existing metals recycling presence in Mexico, the addition of Zimmer provides an expanded commercial presence in the region and strengthens our raw material supply strategy, allowing for cost-effective ferrous scrap procurement for our new Texas flat roll steel mill."

Maysteel's and Steel Dynamics' recent transactions were bright spots for the steel industry in Mexico, which experienced a 15.9% decline in production during January.

Steel production for the month was 1.37 million tons, compared to 1.63 million tons during the same period in 2019, according to a recent report from the World Steel Association.

Part of the lower steel output in Mexico was due to slower production, as well as logistics bottlenecks in China related to the coronavirus, said Alma Iglesias Márquez, sales director for steel manufacturer Grupo Simec.

Guadalajara-based Grupo Simec manufactures steel for the automotive, construction and mining industries. Other large steel companies in Mexico include DeAcero, Tubacero, Altos Hornos de México, ArcelorMittal México and Ternium México.

"They started to alert us and there is an impact because I know that Nissan could close plants in the U.S. and Mexico due to the lack of supply of steel and auto parts from China," Márquez said. "With [China] being the world's largest steel producer, the impact could create winners and losers."

Márquez was speaking at the Mexican Steel Forum in Monterrey Feb. 22-25, according to news outlet El Imparcial.

China remains the world's largest steel producer, despite the disruption caused by the coronavirus. China's steel production for January 2020 was 84.3 million tons, an increase of 7.2% compared to January 2019, according to the China Iron and Steel Association.

The United States produced 7.7 million tons of steel in January 2020, an increase of 2.5% compared to January 2019.

Maysteel officials said Mexico is still an important market.

"As a solutions provider with a global reach, our expanded Monterrey campus elevates Maysteel's ability to offer high-quality services to support the needs of our customers," said Kevin Matkin, president and CEO of Maysteel. "We are more than a fabricator. We are a partner to our clients, providing critical supply chain support for their projects."

In Monterrey, the company serves clients in the renewable energy, data center, self-service, and military and defense industries.

Maysteel's newly expanded facility in Mexico follows the company's recent merger with the Porter's Group, which services the security, military, telecommunication, power generation, heavy equipment and trucking industries.

Steel Dynamics' new $1.9 billion steel mill in South Texas is under construction and expected to begin operations midyear 2021. The plant could create as many as 600 jobs in the area.

Image by Hans Braxmeier from Pixabay