Steel Mills

SMU Steel Summit: Ternium Ramps New HSM, Eyes More Growth

Written by Michael Cowden

Ternium Mexico continues to ramp up its new hot strip mill outside of Monterrey while also eyeing potential expansions on both sides of the Rio Grande, the company’s top executive said.

“We still have a lot of things to do in Mexico. But also in the States, our facility is running at 100% capacity – so we need more capacity there,” Ternium Mexico Executive President César Jiménez said. “So if the opportunity comes and it’s an attractive opportunity…”

Ternium logoJiménez made the comment during a fireside chat at the SMU Steel Summit on Wedneday. John Packard, SMU founder, president and CEO, had asked whether the company might be interested in acquiring a coating facility or even a new mill. Jiménez did not rule out either.

Ternium’s primary operations are in Latin America. But it also operates a mill in Shreveport, La. – Ternium USA – that specializes in coated products, such as galvanized and Galvalume, heavily used in metal building construction.

As for Ternium’s new hot strip mill in Mexico, it is expected to reach 80% of its rated capacity by March 2022, 90% by June-July of next year and to ramp up to its full capabilities thereafter, Jiménez said.

Also known as Hot Mill 4, the facility made its first coil on May 15 at 2:05 p.m. – on time and without incident. Once fully ramped, it will sport annual capacity of approximately 4.5 million short tons per year.

“It is, if not the most, one of the most automated mills in the world,” Jiménez said. Case in point: Automated cranes are used to handle slabs and coils across almost the entire operation. The mill also makes heavy use of censors, bar codes and employs robots to mark coils. “No humans at all,” he said, although he acknowledged that operating such a high-tech plant had been “a learning curve.”

As for slab supplies, Hot Mill 4 receives a significant portion of its requirements from Ternium’s operations in Brazil. But it will continue to buy a large portion of its slab requirements from elsewhere too, he said.

On the coil side, Ternium Mexico does not think its new capacity will result in an oversupplied market either in the U.S. or in Mexico – in part because both countries are net importers of steel. Mexico is on track to import approximately 8.5 million to 10 million tons of flat-rolled steel, or roughly 6 million tons if material exported from the U.S. to Mexico is taken out of the equation.

And demand is strong on both sides of the border.

“They (the U.S.) don’t have enough capacity. So they need some additional capacity,” Jiménez said. But Ternium will primarily focus on replacing imports from other continents and other regions. “And then I think there will be space for all this new capacity.”

One example of how strong demand is in Mexico: air conditioner manufacturers typically order a lot of steel in the winter months for units slated to be sold in the summer. And the opposite is of true for water heater manufacturers, which typically buy heavy in the summer to sell units in the winter. “Since August of last year, everything is 100%. No cycle. Only more demand, more demand and more demand,” he said.

Demand is also growing thanks to manufacturers reshoring operations to North America, and especially to Mexico. If there is a weak point, it is the construction market in Mexico, which, unlike in the U.S., has no massive infrastructure package potentially riding to its rescue, Jiménez said.

Most of the new tons for Hot Mill 4 will be used to serve the Mexican market, but Ternium will continue to supply the U.S., which is not a new trend. “Material (from Mexico) goes north, and material from (the U.S.) will go south,” he said.

Pricing in Mexico and the U.S. trend in the same direction. But if push comes to shove, Ternium thinks its service and quality – and the ability, thanks to the new mill, to make new grades – will give it a leg up on competitors in the southern U.S.

Jiménez, like other mill execs who spoke at Steel Summit, disagrees with the idea that a catastrophic correction is in the works from current record high prices. Still, the steel market would continue to be cyclical. The problem: Predicting exactly when it might cycle down is increasingly difficult given how many new variables there are to consider. Just a few: China removing export tax rebates, Europe eyeing carbon border adjustment mechanisms (CBAMs), and the entire world aiming to increase electric arc furnace (EAF) capacity, Jiménez said.

Such structural changes mean existing models aren’t as useful as they used to be. “I think  we are going to have a new normal in the next (few) years. And from a cost perspective, steel will be much higher. … So even when prices go down, I don’t believe they will go down as much as in previous cycles,” he said.

In other words, higher highs and higher lows – another theme echoed by mill executives throughout the event.

By Michael Cowden,

Michael Cowden

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