(Bloomberg) -- Top Latin American steelmaker Ternium SA is plowing ahead with growth plans, betting that governments in the region have woken up to unfair competition from China, Chief Executive Officer Maximo Vedoya said.
While a deluge of cheap Chinese steel in the past two years has accelerated curtailments at mills around the world, Ternium is stepping up investments, particularly in Mexico, where authorities have stiffened antidumping measures to protect a manufacturing boom, Vedoya said in an interview Tuesday on the sidelines of a BloombergNEF forum in Monterrey.
“We are increasing jobs in Mexico, we are growing, we aren’t putting on the brakes at all,” he said. Brazil’s government is also starting to act, he said.
China’s emergence as the world’s factory spurred booming demand for Latin America’s raw materials. But it also undermined local manufacturing industries, Vedoya said. As the Chinese economy has slowed of late, the Asian giant has stepped up exports, flooding the global market with cheap steel just as the world shifts back toward protectionism. Latin American nations are following in the footsteps of the US and Europe by imposing prohibitive tariffs on Chinese imports.
“No company in the world can compete with the Chinese state,” he said. “All countries are realizing they have to do something.”
Vedoya said Ternium is in position to take advantage of moves by companies to shift manufacturing supply chains to Mexico away from Asia, a phenomenon known as nearshoring. But he said President Claudia Sheinbaum’s government, which assumed power on Oct. 1, must have clear rules for private investment and spend on infrastructure to take advantage of the demand.
“The government has to say where it wants the private sector to be and where it doesn’t,” Vedoya said onstage at the BloombergNEF event, noting that power generation and infrastructure projects represent big opportunities for investment. Sheinbaum’s administration should work to invest in renewable energy and lower power costs through the work of state utility Comision Federal de Electricidad, he said.
Mexico should also improve highways and railways to facilitate export, and better border cross points to the US, he said.
While nearshoring has gotten a lot of buzz, some economists say it has been slow to materialize. Elon Musk has said Tesla Inc. is holding off on building a plant in the Monterrey area because he wants to see how the US election shakes out. Mexico’s congress, meanwhile, has enacted a judicial overhaul that has made the US and corporate leaders question whether they’ll have legal certainty to invest in the country.
Vdeoya said he was optimistic about Sheinbaum’s transition to power and that nearshoring will proceed regardless of who wins the US presidential election next month. He said it was too early to tell how Sheinbaum’s political reforms would affect the business climate.
Executives at Ternium said in July that expectations for higher prices and lower costs will drive a recovery in profit margins and earnings in the fourth quarter and into 2025. Shares of the steelmaker are down about 15% this year.
Ternium has already started making at least one product in Mexico — sophisticated steel for the automotive industry — that was previously imported from Asia, Vedoya said.
“The question in Mexico is not whether it will lose an opportunity for nearshoring, but rather how much can we take advantage of it?” he said in the interview.
--With assistance from Maya Averbuch.
(Recasts throughout with comments in interview on China)
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