Boston, MA -- (SBWIRE) -- 08/02/2012 -- BMI's Mexico Metals Report for Q3 2012 examines the enormous long-term potential of the local steel industry, but flags short-term concerns about the impact of a US economic slowdown on exports.

The report examines how producers are maximising returns in the Mexican market, while minimising investment risk and also explores the impact of the increasingly precarious looking external macroeconomic environment on the Mexican consumer and on the ability of producers and exporters to realise returns in the short-term.

In the first four months of 2012, Mexican crude steel production fell 2.8% year-on-year (y-o-y) to 5.81mn tonnes (mnt) following a strong performance in 2011 when output grew 8.6% to 18.1mnt. The disappointing performance in the first few months of the year came despite strong growth in the automotive sector, which saw output grow 5.1% y-o-y on the back of 15.3% growth in exports. The decline in Mexican output helped cancel out Brazil's contribution to Latin American steel output growth.

View Full Report Details and Table of Contents

The main risk will come from the effects of the eurozone crisis on the US economy, which represents 80% of Mexico's exports. On the upside, Altos Hornos de Mexico (AHMSA)'s Fenix Project aims to increase the steelmaker's production capacity to 5mnt by the end of 2012, but BMI believes that the positive impact will largely be felt in 2013 as the market recovers.

Apart from anti-dumping regulatory curbs on exporters by the US, we note that cost pressures could still hurt Mexican producers, given that oil prices have continued to rise in recent months, which could translate into higher electricity costs. Indeed, electricity prices were hiked in 2011, and we would not rule out further hikes. Given that approximately 70% of Mexican steel output is derived from electric furnaces, this could affect profitability.

Over the last quarter BMI has revised the following forecasts/views:

- The exposure to export markets of Mexican manufacturing will erode overall output with BMI forecasting a 1.0% drop in output to 18mnt, a downward revision from 4.2% growth forecast in the previous quarter. - For 2012, we retain our forecast consumption growth of 5.0% to 21.8mnt for the Mexican steel industry. - Looking further ahead to 2013, we expect a strong rebound as exports of manufactured goods pick up. An upward revision in the growth rate forecast for this year coupled with base effects also supports stronger performance. As such, we retain our forecast of 19.5mnt crude output growth for the year - an increase of 8.5% y-o-y.

About Fast Market Research
Fast Market Research is an online aggregator and distributor of market research and business information. Representing the world's top research publishers and analysts, we provide quick and easy access to the best competitive intelligence available. Our unbiased, expert staff will help you find the right research to fit your requirements and your budget. For more information about these or related research reports, please visit our website at http://www.fastmr.com or call us at 1.800.844.8156.

Browse all Materials research reports at Fast Market Research

You may also be interested in these related reports:

- Netherlands Metals Report Q3 2012
- South Korea Metals Report Q3 2012
- South Africa Metals Report Q3 2012
- France Metals Report Q3 2012
- Spain Metals Report Q3 2012
- Austria Metals Report Q3 2012
- Sweden Metals Report Q3 2012
- China Metals Report Q3 2012
- Iran Metals Report Q3 2012
- Belgium Metals Report Q3 2012