Mexico’s aluminum industry expects some improvement in Q1 on stabilized demand and rising sales for the metal from the auto sector. A decline in overall demand for aluminum was led by a 15-20pc drop in demand for the metal from the country’s automotive sector in 2019, which in turn has led to a decline in aluminum scrap prices in Mexico.
In fact, aluminum scrap prices fell 10pc last year on lower demand for products to supply the automotive industry, Itzel Sánchez, purchasing manager at TST Nikkei Metales Mexico, told Davis Index.
For the January-November period, Mexico car production fell by 3.5pc to 3.54mn cars, while exports over the same period declined by 2.2pc to 3.1mn cars, according to the latest data from Amia, Mexico’s domestic automotive association. Car production is expected to reach 3.75mn units in 2019, down 4pc in comparison with 2018, while exports are estimated to decrease 2.7pc from 2018 to 3.35mn units.
Apart from carmaking the foundries, mills, and recycling centers are looking at the United States- Mexico-Canada Agreement (USMCA), agreement to shore up demand for aluminum. One of the key challenges that the businesses would face would be gearing up to meet all the new requirements on aluminum and steel content under the agreement, Sánchez said.
Under the new USMCA, 70pc of all steel and aluminum used in the production of the automobile must originate in North America.
Also, 75pc of auto parts must be manufactured in the US, Mexico or Canada, and between 40pc to 45pc of the vehicle must be produced by workers being paid at least $16 per hour.
According to Sánchez, some auto parts companies have already started requesting for a certificate of origin as proof to see how the materials will be delivered this year to meet the requirements of USMCA.
The new requirements will be challenging to comply, she pointed out, as not all foundries or mills will have the origin certificate.
However, she added that the foundries and mills should have a list of all suppliers that meet the requirements and develop business only with those that comply with these new rules.
The final USMCA agreement contains a number of protections promoting North American aluminum use, particularly in the automotive sector. Imports of aluminum sheet and plate from China into Mexico have increased by nearly 150pc in 2018 and more than 1,700pc since 2014, according to figures from the Aluminum Association.