Trade flows of steel from Mexico to the US, and of ferrous scrap from the US to Mexico, plummeted in the first half of the year on tariff-driven uncertainty.
US president Donald Trump on 12 March set a steel import tariff of 25pc, which doubled to 50pc on 4 June.
Although the March 25pc tariff did dent Mexican steel exports to the US — they were 6pc lower year-to-date in April and 12pc lower in May, according to Mexican steel chamber Canacero — June's 50pc tariffs contributed to a 17pc dip in northbound steel flows in the first half of 2025.
Mexico had been exempt from tariffs since 2019 under the US-Mexico-Canada Agreement (USMCA) and Mexican steelmakers have historically exported northward when domestic demand weakens, but the absence of the US as a viable buyer — and economic uncertainty in Mexico — is pressuring the domestic market.
First-half 2025 steel consumption in Mexico was 12.77mn metric tonnes (t) — 8pc lower than the same period of 2024, which itself was 2pc lower than the first half of 2023, according to Canacero.
Mexico's prior presidential administration stimulated domestic demand with major steel-consuming infrastructure projects, including the Olmeca refinery in Tabasco, the Tren Maya along the southern third of the country and the Felipe Angeles airport near Mexico City.
Although the new administration of President Claudia Sheinbaum campaigned, in part, on the construction of over 1mn homes and several road projects, the administration has come up against a hefty deficit and is facing steep declines of foreign and industrial investments. Mexico's economic growth slowed to 0.1pc on an annual basis in the second quarter, as contractions in the industrial sector were partially offset by growth in agriculture.
No steel, no scrap
As a result of stifled demand in Mexico, several Mexican mills pulled out of the Texas and southern US ferrous scrap markets in the months immediately following the imposition of the original 25pc steel tariffs, amid uncertainty about reciprocity from Mexico. One has since returned to the market, albeit at about half of its pre-tariff purchase levels.
Ferrous scrap is the main feedstock for electric arc furnaces (EAF), which both Deacero and Ternium — two major steelmakers in the northeast steel-heavy region — operate. The US until March was a key supplier of that raw material. Ferrous scrap is one of the larger and more variable costs to operating an EAF.
The US exported 440,700t of ferrous scrap to Mexico from January-June of this year, a 56pc drop from the same period last year, according to the US Census Bureau.
Mexico's National Institute of Statistics and Geography (INEGI) has not yet reported its June scrap import figures, but imports were 437,700t in the first five months of 2025, according to INEGI's latest data. That is less than half of the 900,700t imported in the same period of 2024 and of the 1mn t imported on average in January-May of the last five years.
Mexican steelmakers throughout this year have attempted to lower their domestic scrap buying prices, but suppliers have largely pushed back as US bids proved to be more attractive than domestic selling.
Still, three consecutive months of sideways settlement in the Texas ferrous scrap market could give Mexican steelmakers some breathing room. The spread between Argus-assessed Texas delivered #1 HMS and Monterrey/Saltillo delivered pesado narrowed to near-parity this month from an average of $100/t to start the year. The spread between Texas and Monterrey/Saltillo delivered busheling narrowed to $47/t from a 2025 peak of $125/t in March.
Mexico currently operates solely on EAFs after the shutdown of now-defunct Altos Hornos de Mexico (AHMSA) in late 2022 and ArcelorMittal idling the 2.5mn t/yr blast furnace at its Lazaro Cardenas mill in the state of Michoacan. It is unclear when that blast furnace will resume operations, but some in the market posit that Lazaro Cardenas' turn to only EAF production, albeit temporary, could stretch scrap inventories in the country.
Second-half outlook
Mexican market participants surveyed by Argus have reported that they do not see a potential upside to demand at least through the end of this year as public spend on infrastructure and foreign investments are not expected to materialize in the period.
Still, some see cause for optimism with ArcelorMittal last week announcing the idling of the blast furnace at its 6.5mn t/yr steel mill in Lazaro Cardenas. The furnace is responsible for the mill's long steel production and could be down for as long as six months.
While the idling was not publicly ascribed to the general oversupply in the country, some in the market said that the absence of the tons produced from that blast furnace could relieve pressure on prices. Still, a recent rebar price increase from several producers in the country is not expected to stick as demand has not fundamentally changed.
Steelmaker Ternium in its second quarter earnings call said it expects a sequential increase in shipments in the third quarter, potentially driven by the resolution of trade tensions between the US and Mexico and the realization of import-cutting measures by the government.
