CRU: AHMSA Bankruptcy Clears Way for Restart With New Owners

AHMSA Background

In 2018, AHMSA produced 4.5 million metric tons, reaching a capacity utilization of 82%, but the volume of the last two years was far from this high. Burdened by financial difficulties, the company produced 2 million metric tons of crude steel in 2021 and only 1.8 million metric tons in 2022, according to CRU estimates. It estimates total finished steel production of 1.5 million metric tons in 2022, with more than 50% being hot-rolled coil, and the remaining divided mostly between cold-rolled coil and plate products.

After several financial difficulties, AHMSA finally stopped production in December 2022. The company is a relevant sheet producer in Mexico, having the annual capacity to produce 2.7 million metric tons of HRC, 1.0 million metric tons of CRC and 1.6 million metric tons of plate products. The aforementioned stoppage has been impacting the domestic supply of all these products.

AHMSA Bankruptcy

In January, a court of first instance in Monclova declared AHMSA in bankruptcy at the request of one of its creditors. At first, the court declared CANACERO, the Mexican iron and steel industry chamber, as the administrator but it was later changed to another entity – the National Chamber of Commerce of the city of Múzquiz, Coahuila. The declaration of bankruptcy was published by the official gazette of the Mexican government on April 17. AHMSA now has to present its balance sheets and cannot sell assets, among other prohibitions. Creditors have 45 days to present their claims. This will allow AHMSA to renegotiate its debt.

New Owners

After the shareholder meeting on April 20, the company announced Argentem Creek Partners as the new shareholders. Argentem Creek Partners is an emerging markets credit specialist firm that invests in special situations, private credit, high yield, and trade finance. In the meeting, the shareholders appointed a new board of directors and a long-time employee of AHMSA, Luis Zamudio Miechielsen, as CEO of the company.

The company announced an agreement signed on February 20 to sell the majority of shares to a group of foreign investors to recapitalize the company. The new investors will need to inject $200 million by mid-May as working capital, and normalize labor responsibilities and operations in the steel mills and mines. AHMSA said this will allow the company to do a financial restructuring and exit the bankruptcy process. At the time, they did not name the new investors.

AHMSA Restart

CRU currently expects AHMSA to restart production in Q3 as long as they receive the promised funds from the new shareholders. CRU’s current projections assume a restart of supply to the market in Q3 and a slow ramp-up in Q4 and early 2024.

For the domestic market, CRU expects increased level of imports to cover the gaps in domestic demand, especially in CRC and plate. In terms of HRC, the gap should be covered partially by higher production of other mills in the market with spare capacity and an increase of imports.

This analysis was originally published by CRU on April 25.

By Diego Giangreco, CRU Steel Analyst