Steel Mills

AHMSA Ready to Boost Production Now that Tariffs are Gone

May 23, 2019

Altos Hornos de Mexico (AHMSA) plans to increased steel production by 30 percent now that U.S. tariffs have been eliminated. The year-long Section 232 measures caused a 25 percent drop in AHMSA’s steel production and $300 million in lost revenue, said AHMSA President Alonso Ancira Elizondo. As orders from the U.S. fell due to the tariffs, AHMSA was forced to cut 100,000 metric tons of production.

Elizondo expects the company to return to pre-tariff production levels within three months. On the day of the tariff announcement, orders immediately increased from 270,000 metric tons per month to 340,000 MT tons scheduled for June.

Elizondo called the damage from the U.S. tariffs “serious,” compromising the company’s ability to pay bills, make investments and export products. Pre-tariffs, the company exported 30,000 metric tons of steel to the U.S. per month and 100,000 MT per month through its customers.

“Even local customers like Pytco stopped buying steel because they depended on their exports to the United States,” said Elizando during a press conference in Monclova.

Elimination of the tariffs will allow the company to recover, he added. “It will not be immediate or rapid, but gradually return to normal.”

AHMSA’s plans include a $300 million dollar investment in 120 furnaces at its Coquizadora coking plant at Minera del Norte, as well as completion of new facilities at its Hercules unit that will increase iron ore supply by 76,000 metric tons monthly. Eliminating ore imports and relying on its own resources will lower costs and strengthen the company, said Elizando. The company expects to complete the project in September.

The end of the tariffs also marks the resuming of payments by AHMSA to creditors under a financial agreement signed in May 2016. AHMSA announced earlier this month that it had secured $575 million in financing from Cargill Financial Services International, and $100,000 of that has been issued to creditors for payment of outstanding debt.

AHMSA is the largest integrated steel producer in Mexico. Its two steelworks have a total production capacity of 6.5 million metric tons of liquid steel annually. In 2018, liquid steel production fell to 4.5 million MT tons and 3.88 million MT tons of finished products. The company produced 13 percent of Mexico’s steel in 2018—24 percent of flat steel and 12 percent of finished steel exports.

In first-quarter 2019, the company posted an operating loss of USD $17.8 million, a 137.2 percent decline year-over-year.