Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Higher shipments and steel prices, and better demand are expected to improve Ternium’s earnings in the fourth quarter, the Mexican steelmaker indicated in its Q3 2020 earnings report.


The company, however, warned of uncertainty given the COVID-19 pandemic and containment policies that may affect markets worldwide and therefore its outlook too. 


The Mexican market’s steel demand could return to pre-pandemic levels by Q4 2020 and the company predicts shipments of slab from its Brazilian facility to remain consistent into Q4. Brazilian and Argentinian domestic steel consumption levels are also showing a faster recovery than expected. 


The steelmaker returned all its facilities to normal production during Q3 2020 and restarted the construction of its new hot-rolling mill in Pesquería, Mexico. The company also commissioned its Colombian greenfield rebar facility during the quarter.


Ternium’s steel shipments decreased by 14pc to 8.3mn mt in the first nine months in 2020 from 9.6mn mt in the year-ago period due to lower steel demand in H1 2020. Iron ore shipments took the opposite direction and increased by 7pc to 2.9mn mt from 2.7mn mt during the same period under comparison. 


In Q3 2020, steel shipments declined by 7pc to 2.8mn mt from 3mn mt in the same quarter last year, while iron ore shipments decreased by 4pc to 869,000mt from 904,000mt during the same comparative period. 


Regionally, shipments in the first nine months in 2020 declined by 10pc in Mexico, 13pc in the Southern region, and 19pc in other markets. Prices in Mexico dropped severely in the period as net sales fell by 23pc to $3.2bn in the nine-month period compared to $4.1bn a year ago. Southern and other markets fell by 10pc and 29pc, respectively. In the US, Ternium continues to be affected by the tepid pipe demand in the oil industry. In the third quarter, 51pc of steel shipments were made to Mexico, 19pc in the Southern region, and 30pc to other markets. 


The firm’s net sales fell by 22pc to $6.2bn in January-September 2020 compared with $7.9bn in the year-ago period. Operating income declined by 48pc to $402mn in the nine-month period compared to $772mn achieved in the same period in 2019. Net sales fell by 13pc to $2.1bn in Q3 2020 from $2.4bn in Q3 2019. 


Ternium’s EBITDA decreased by 30pc to $879mn in January-September 2020 from $1.3bn in the year-ago period. EBITDA margins dropped by 2pc points from 16pc in the nine-month period last year to 14pc this year.   



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