Mexican steelmakers, facing sluggish domestic demand, could struggle to find outlets for production after the elimination of US steel tariff exemptions.
US president Donald Trump on Monday revoked all exemptions from the 25pc steel import tariff, effective 12 March. Canada and Mexico as part of the US-Mexico-Canada Agreement (USMCA) were exempt from Section 232 25pc steel tariffs announced in 2018, along with Argentina, Australia, Brazil, the EU, Japan, South Korea and the UK.
The renewed 25pc tariffs also include "derivative steel articles" — downstream and value-added products.
Mexico also faces the potential imposition of a 25pc all-goods tariff in March by the Trump administration. Originally meant to be imposed on 1 February, the tariff was delayed by 30 days on 4 February. Should the tariff — which only included Mexico and Canada — be imposed at the end of the postponement, US buyers could face a 50pc tariff on Mexican steel.
More Mexico capacity looms
The gap left by the imminent exit of the US as a free trade partner leaves Mexican steelmakers with few obvious outlets as a slew of incoming capacity expansions are poised to bloat domestic inventories.
Mexico produced 18.2mn metric tonnes (t) of steel in 2024, down from 19.85mn t in 2023 as steelmakers pulled back production to counter weak demand, according to Mexican steel association Canacero.
Mexico exported 3mn t of steel in 2024 — 2.3mn t of which went to the US, according to Canacero. That was followed by Canada, which imported just 118,000t in 2024, and Saudi Arabia, which imported 90,000t.
Still, Mexican mills are expected to add more than 5mn t/yr of additional steel production by the first half of 2026. About half of that will come from steelmaker Ternium's slab mill in Pesquería, Nuevo León, which is expected in the first half of 2026.
The Ternium slab mill's location in northern Mexico was meant to help supply steel to the USMCA region. Some in the market more recently told Argus that the new tariffs would have very little effect on Pesquería's strategy — positing that the slab produced there could be exported to Ternium's facilities in Brazil. Still, Mexico only exported 27,000t of steel to Brazil in 2023 and it was not listed as a top-10 export partner in 2024.
Long steelmaker Deacero in 2023 also announced a $1bn expansion over three years to grow production by 1.2mn t/yr. Deacero's expansion, too, was aimed at meeting expected nearshoring-driven demand in the medium and long term. In 2023, long steelmaker Simec announced a new 500,000t/yr rebar mill and Brazilian steelmaker Gerdau in May announced it was exploring sites for a 600,000t/yr special steel mill in Mexico.
Slow demand adds further pressure
In the absence of overseas demand for steel, Mexican steelmakers could have to look to a shaky domestic market to offload production.
Federally funded infrastructure projects like the Tren Maya, the Olmeca Refinery in Tabasco and the Felipe Ángeles airport near Mexico City either wound down or concluded by 2024. The projects took with them a boon in steel demand and production that faded further as buyers were reluctant to commit to tons before the general elections in June 2024.
That demand has yet to recover.
Mexican president Claudia Sheinbaum, who took office in October, campaigned partly on the construction of 1mn homes — which would require an uptick in rebar consumption. Sheinbaum is expected to announce her full infrastructure plan on 17 February.
The market has few other options for Mexican-produced steel should the government not adopt publicly funded steel-consuming projects as the country faces expectations of slower economic growth this year.
Nearshoring efforts, including plans for domestic production of electric vehicles (EVs) from both Chinese EV makers and US automaker Tesla, have stagnated. A wider count of new foreign direct investments in Mexico shrank last year to the lowest level since 2014.
Sheinbaum on Monday confirmed that the Mexican government learned of the steel tariffs from media outlets. Any previously discussed retaliatory measures would come after a clarification of the tariffs, Sheinbaum added.
