The Mexican flat steel market is looking to 2026 for a recovery in demand after nearly two years of contraction.
Mexican steel consumption in the first 10 months of 2025 fell from a year earlier by 10pc, according to steel chamber Canacero. The decrease follows a 5pc decrease in demand in full-year 2024, which followed a 14pc increase in 2023 that was bolstered by a period of both growing foreign investment and domestic production expansion.
As a result of lowered domestic and foreign investment levels, Mexican domestic steel demand has fallen for nearly 22 months in a row, taking prices down with it.
This comes as the US — once the largest importer of Mexican steel — is effectively shut out of the market, taking with it a necessary pressure valve for the Mexican market during domestic downturns.
The US on 12 March 2025 imposed 25pc tariffs on imported steel, which doubled to 50pc on 4 June. Mexico had been exempted from US steel import tariffs since 2019 under the US–Mexico–Canada Agreement (USMCA) until the US imposed the global steel import tariffs. Mexican steel exports to the US fell by 27pc to 1.9mn metric tonnes (t) in January-October from the same period in 2024, according to the latest Canacero data.
Mexico's Congress on 11 December voted in favor of increasing tariffs on more than 1,400 goods from non-trade treaty (NTT) countries — including some steel products and steel-consuming industries like autos and auto parts — effective 1 January. For those NTT countries, including China, South Korea and Japan, steel tariffs will rise to 20-50pc from the current 0-50pc, tariffs on autos will rise to 50pc from 15-20pc and tariffs on auto parts will rise to 10-50pc from the current range of 0-35pc.
The import tariff on hot-rolled coil will rise to 35pc from 25pc and the tariff on rebar will remain at 35pc.
The tariffs — largely aimed at China and other Asian countries accused of undercutting domestic markets in Latin America — are part of an effort to spur domestic demand and counteract the US tariffs. They are also viewed by many as amounting to appeasement of the US ahead of the USMCA negotiations as the US has accused Mexico of serving as a channel for tariffed Asian steel entering the US market.
The current market panorama is expected to remain at the status quo until either the US tariffs are addressed during USMCA negotiations next summer or until domestic demand increases, which is not expected in the near-term.
Tariffs pile on headwinds
Although the US's tariffs have only served to further pressure domestic steel consumption, they came on the back of an already-stagnating market.
Mexican flat steel demand began waning in early 2024 as federally funded infrastructure projects concluded, and demand was further depressed by buyer reluctance ahead of that June's presidential election. The downtrend has not reversed in any significant way since.
Mexican industrial activity, much of which consumes steel, fell in June-September 2025, pressured largely by weak construction activity, according to the industrial activity indicator (IMAI). Industrial activity fell on the month by 0.3pc in September, marking a fourth consecutive monthly decline. Construction fell by 2.1pc in September, down for a third month.
Manufacturing activity has contracted for 20 consecutive months as of November — also pressured by declines in potentially steel-consuming construction. The manufacturing purchasing managers' index fell in November to 45.5 from a revised 46.9 in October, showing deepening contraction after three months of upticks that were still in contraction territory.
The dip in construction activity is part of a wider economic slump in the country. Analysts in their December survey lowered Mexico's 2025 and 2026 GDP growth outlook because of falling industrial activity. The median 2025 growth estimate in December fell to 0.39pc after dropping in November to 0.4pc from 0.5pc.
The administration of President Claudia Sheinbaum earlier this year introduced Plan Mexico, a domestic investment plan that includes steel-intensive and steel-using infrastructure projects. The scope of the plan, however, could be hampered by a lack of capital.
Plan Mexico proposes public investment in several steel-consuming projects, including 1mn homes, urban mobility infrastructure and 3,000km of roads. A federal budget to be voted on in early 2026 proposes allocating Ps105bn ($5.8bn) to new train routes, Ps28bn to new roads and Ps39bn to updating and maintaining existing train routes.
Still, little of that investment would benefit the flat steel market, rather relying on long steel products like rebar and rail.
Mills look to tariffs, imports for support
There could be some support on the horizon for flat steel, despite the headwinds.
Flat steel mills — emboldened by the tariffs, rising US HRC prices and declining imports — published a $25/t HRC price increase on 1 December, followed by another $25/t increase on 15 December. The increases pushed the Argus HRC ex-works northeast Mexico price to $760-762/t on 29 December from $680-700/t where it had hovered for much of the latter half of the year. The increases were largely accepted and spurred a spike in demand, mostly by buyers trying to get ahead of further increases. Market participants in the last days of 2025 said they expected a further increase in early January.
The 2026 tariffs are the culmination of several protectionist measures undertaken by the Mexican government, which market participants are confident will spur domestic demand as imports slip.
The economy ministry in January 2024 imposed anti-dumping duties of up to 80pc specifically on Vietnamese cold-rolled coil, which it said originated in China. The ministry in April 2024 also introduced steel import certificates in the midst of an ongoing clash with US lawmakers who were then calling on the administration of then-president Joe Biden to repeal Mexico's section 232 import tariff exemption, saying Mexico was allowing steel of dubious origin to be exported to the US. Mexico in March also said it would investigate Chinese and Vietnamese HRC imports after domestic steelmaker Ternium accused three companies of dumping.
As a result, January-October steel imports fell by 13pc to 9.1mn t.
Industrial output also rose in October following four months of declines, spurred by an uptick in construction, according to the latest IMAI data. Industrial production rose by 0.7pc in October from the prior month.
Mexico in October advanced several steel-consuming infrastructure projects from Plan Mexico.
"We depend on ourselves," steel service center Fortacero chief executive Eduardo Treviño told the National Confederation of Steel Distributors on 14 October.
