Mexico’s steel industry is facing a significant challenge as the country’s iron and steel chamber, Canacero, raises alarms over the surge in steel exports from the United States. This development has sparked concerns about potential violations of existing trade agreements and threatens to disrupt the delicate balance of the North American steel market. As tensions rise, both countries find themselves at a crossroads, with the specter of trade retaliation looming on the horizon.
The Growing Trade Imbalance
The steel trade relationship between Mexico and the United States has become increasingly lopsided in recent years. Canacero reports that between 2015 and 2023, bilateral trade in finished steel products showed an average annual surplus of 1.2 million metric tons (Mt) in favor of the United States 7. However, the situation has worsened dramatically in 2024, with the surplus expected to double. According to annualized data through November 2024, US exports to Mexico increased by a staggering 21% compared to the 2015-17 base period. In stark contrast, Mexican exports to the United States fell by 2% during the same timeframe7. This shift has resulted in a surplus of 2.4Mt and a value exceeding US$4 billion in favor of the US, highlighting the growing disparity in steel trade between the two nations.
Market Share Disparity and Industry Displacement
The impact of this trade imbalance is evident in the market share figures for 2024. The United States has captured a significant 15.9% of the Mexican steel market, while Mexico’s presence in the US market has dwindled to a mere 2.2% 7. This stark contrast underscores the extent to which the Mexican steel industry is being displaced by its northern neighbor. Canacero’s statement emphasizes that while Mexico has consistently supported regionalization and integration under the United States-Mexico-Canada Agreement (USMCA), the current outlook paints a troubling picture for the Mexican steel industry. The chamber argues that this trend threatens to undermine the principles of fair trade and regional cooperation that the USMCA was designed to promote.
Concerns Over Steel Origin and Potential Triangulation
Adding to the complexity of the situation, Canacero has raised concerns about the origin of steel being exported from the United States to Mexico. According to data from the Mexican economy ministry, 27% of the steel that the United States exports to Mexico originates in Asian countries, with possible cases of triangulation from Malaysia7. This revelation has sparked fears that some US exports may be serving as a conduit for Asian steel to enter the Mexican market, potentially circumventing existing trade regulations.Canacero strongly refutes accusations that Mexico serves as a bridge for the triangulation of Asian steel to the United States. To support this claim, the chamber cites data from the United States Steel Import Monitoring and Analysis System (SIMA), which indicates that between January and November 2024, Mexico exported only 580 tons of steel of Chinese origin, representing a minuscule 0.02% of the total7. Furthermore, Canacero emphasizes that 85% of the steel exported by Mexico is melted and cast within the country, underscoring the domestic nature of Mexican steel production.
Trump’s Tariff Threats and Potential Retaliation
The situation has been further complicated by recent statements from former US President Donald Trump, who has unveiled plans to impose tariffs on imports of various products, including steel, aluminum, and copper 7. These threats have the potential to disrupt global trade in raw materials and have raised concerns about the future of US-Mexico trade relations.In response to these developments, Canacero has expressed support for potential retaliatory measures. The organization backs President Claudia Sheinbaum’s statement that, if necessary, her government will apply proportional and immediate retaliation on US steel products exported to Mexico 7. This stance is rooted in the belief that Trump’s proposed tariffs on Mexican steel would violate the USMCA trade agreement, which was designed to promote fair trade and regional integration.
The USMCA and Regional Integration
Despite the current challenges, Canacero reaffirms its commitment to the USMCA and regional integration. The organization views these frameworks as the best tools to address unfair trade practices, particularly those originating from China. These practices include evasion tactics, export subsidies, excess steel capacity, and customs fraud7.Canacero emphasizes that Mexico has consistently supported regionalization and integration under the USMCA. However, the current situation threatens to undermine these efforts and could potentially lead to a breakdown in the cooperative spirit that has characterized North American trade relations in recent years.
Mexico’s Protective Measures and Industry Outlook
In response to these challenges, Mexico has implemented several measures to protect its steel industry and the broader region from unfair practices. These include:
- The application of tariffs of up to 50% on steel imports from countries with which Mexico does not have trade agreements.
- The implementation of an automatic import notification system with certification of the producing mill.
- Various investigations into unfair trade practices, including anti-dumping cases and evasion inquiries7.
Additionally, Mexico has collaborated with US Customs and Border Protection to develop a steel traceability system aimed at identifying the origin of steel products and preventing triangulation attempts.Looking ahead to 2025, the Mexican steel industry faces both challenges and opportunities. Despite the current trade tensions, there are signs of potential growth and development within the sector:
- Ternium, a major Latin American steelmaker, is in the final phase of an expansion protocol that began in 2010. By 2025, the company expects to add a new cold rolling mill with an annual capacity of 1.6 million metric tons and a 600,000-metric-ton mill for galvanized steel production1.
- TYASA, a Mexican steelmaker, is constructing a new SBQ mill in Orizaba, Veracruz, which is expected to add 350,000 to 400,000 metric tons of annual capacity when it becomes operational in Q3 of 2025 1.
- Simec, another prominent Mexican steelmaker, has ongoing expansion plans for its Apizaco and San Luis Potosi sites, including a new rebar rolling mill with an annual capacity of 500,000 metric tons 1.
These developments suggest that despite the current trade tensions, Mexican steel producers are investing in their future and working to enhance their competitiveness in the global market.
The Role of Nearshoring and Industrial Policy
The recent nearshoring phenomenon has emphasized Mexico’s position as a key player in North American supply chains, particularly in the automotive sector. Essential metal components such as transmissions, suspensions, and engine parts represent more than 50% of the national auto parts output3. This trend is expected to continue supporting the development of Mexican manufacturing capabilities. However, the potential implementation of US tariffs could disrupt these supply chains, posing a significant challenge to the industry. Despite this threat, Mexico’s robust manufacturing infrastructure and geographical proximity to the US market remain critical competitive advantages 3.The Mexican government’s recently presented “Plan Mexico” industrial policy opens new opportunities to strengthen supply chain development, focusing on sustainable technologies and advanced manufacturing 4. This initiative, coupled with the country’s existing advantages, could help the Mexican steel industry navigate the challenges posed by increased US exports and potential tariffs.
Conclusion: Navigating Uncertain Waters
As the Mexican steel industry faces the dual challenges of increased US exports and potential tariffs, it finds itself at a critical juncture. The industry must balance the need to protect domestic producers with the benefits of regional integration under the USMCA.The coming months will be crucial in determining the future of US-Mexico steel trade relations. Both countries will need to engage in careful diplomacy to address the concerns raised by Canacero while maintaining the spirit of cooperation that has characterized their economic relationship.For the Mexican steel industry, the path forward will likely involve a combination of strategic investments in domestic production capabilities, continued efforts to combat unfair trade practices, and active engagement with US counterparts to find mutually beneficial solutions to the current trade imbalance.As the situation evolves, stakeholders on both sides of the border will be watching closely to see how this delicate balance between competition and cooperation in the North American steel market will be maintained. The resolution of this issue will have far-reaching implications not only for the steel industry but for the broader economic relationship between Mexico and the United States in the years to come.
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