Steel Summit: Ternium CEO predicts China will reduce overcapacity 

Progress at Pesquería 

Ternium launched its Pesquería industrial center in Mexico in 2013. In 2021, the second phase of the project grew the steelmaker’s product line to include hot rolling and increased its annual output to 4 million metric tons (mt) per year.

Now, phase three is underway, which the CEO says is the company’s largest investment in history. It increases the Mexican steel producer’s capabilities and includes a cold-rolling mill, a galvanizing line, a pickling line, and advanced finished lines. 

The executive said the company is working to push out cheap Chinese steel imports. The plan is to produce products made for the region. Vedoya noted that Ternium invested $2.9 billion in its direct-reduced iron (DRI) and EAF facility. He said the project will cut carbon emissions in steelmaking. According to him, the new process will bring emissions down to “one-third of emissions from a blast furnace.”

Ternium is actively working to replace slabs from Brazil as the company’s EAF ramps up completely.  

US-Mexico trade relations  

Vedoya told audiences that Mexican President Claudia Sheinbaum would be placing tariffs on steel imports to Mexico from China. He lauded the president’s plans to protect Mexican steel producers.  

“If you see the plan that the President of Mexico had during her campaign through the elections, it includes a vision for bringing manufacturing back to the region. She didn’t single out Mexico, she spoke of North America,” Vedoya said.  

He added that Sheinbaum aligns with US President Donald Trump’s vision for the US manufacturing sector.

“All the things that Mexico wants, in a sense, are very similar of what President Trump is doing here in the US, so that’s why I think that at the end, it should be very rational to have a USMCA (Agreement),” said Vedoya. 

Ternium’s leader remains convinced the US administration holds a strong vision for returning industry and preserving the health of the country’s steel producers.

“I think the US administration is doing the right thing, not everything, but I think that the issue here is how we manage or how we compete, or what we do with China and all the surplus countries [countries flooding the market with cheap steel] of Asia,” he said.  

He added, “China is a problem, and we have to deal with that. So, I think the vision is correct.” 

The executive stressed that the US should not fight cheap steel and aluminum imports from Asia alone. He said the US must work with Mexico and Canada. Only by acting together can the continent ensure shared success.

“The US cannot fight this in isolation, completely isolated from all. You have to form an alliance, a coalition of countries that think alike, that have democracy as a form of government, and that respect the rule of law. So, I think that’s the other part that is missing,” he said.  

He added: “If we do the things well, if the US, Mexico, even Canada, try to focus and give a sense of this is a common market with rules, the three countries are going to benefit.” 

Market uncertainty  

Vedoya agreed that uncertainty spurred by Trump’s tariffs has shaken up the market. He noted that Mexico is unlikely to form a trade alliance with the US if Section 232 tariffs continue. This situation adds to overall market uncertainty.

“In the short term, we have all this uncertainty, and clearly, it’s hurting Mexico. It’s hurting a lot of countries. But again, I mean, a way of starting this coalition is clearly the USMCA,” said Vedoya.  

The CEO continued, “I think 232 tariffs should be part of the negotiation; I don’t see Mexico entering into a new agreement with the 232 tariffs. In my opinion, all the tariffs should be gone in the USMCA as rule of origins restrictions will be more tough.”  

Takeaways 

Ternium’s chief is confident the US and Mexico will reach an agreement. He believes it will let them work toward eliminating Chinese steel imports from the regional supply chain.

However, Vedoya cautions that Trump’s insistence on keeping the current Section 232 tariffs against the US’s North American neighbors will likely block a successful USMCA renegotiation.

Vedoya contends that without the coalition, the opportunity to create a protective wall from the imports disappears.

He sees Ternium’s Pesquería progress as a means for increasing lower-carbon-emission produced steel into the regional market. He believes that the combined efforts and vision of North America will force China to reduce its overall steel capacity.