Mexican Steelmakers Warn Of Uncertain Future

Mexican steelmakers, who had expected a rise in steel prices to result in a strong 2004, now see an uncertain future due to scarcity in raw materials driven by rising global demand and "uncompetitive" energy costs.

"The future is uncertain on account of factors that are difficult to predict, including the price and availability of raw materials and world economic growth levels," Santiago Clariond, vice-president of the national steel industry chamber Canacero told a news conference on Wednesday.

"From (a situation of) oversupply over several years...a scarcity has been generated from the third quarter 2003 which is set to sharpen in 2004," the official said, adding that "Mexico is not self sufficient in supplies - coal, steel and coke among others."

Last year, Mexico produced 15.1 million liquid tons of steel. Clariond said that the sector, which has seen high growth levels in recent months on the back of strong Chinese demand, remained on track in 2004 to realize growth of 6.6 percent to around 16.1 million liquid tons.

Nevertheless, the chamber warned that a broad rise in costs and materials in the five years to the first quarter of 2004 -- including a 243 percent rise in scrap metal costs and a 217 percent rise in domestic gas prices -- exceeded steel prices, "affecting competitiveness."

"It is very difficult to justify investment in the Mexican steel industry today with the current prices charged for energy," Canacero deputy director Guillermo Vogel told Reuters. "Reform of the gas sector in Mexico is vital," he added.

Of the 15.1 million tons of liquid steel produced in Mexico last year, Vogel said "six million tons were heavily dependent on (high) gas prices." Reuters