External risk factors for the Mexican steel industry remain the volatility of the currency exchange rate and the impact of international metals prices.
- In 2015 Mexico´s domestic steel production decreased 3.7%, to 18.2 million tonnes, the lowest amount in six years. Domestic production capacity decreased from 65.7% to 62.5% due to the suspension of activity in certain steel plants, as low-priced Chinese steel imports increased. Total steel imports rose by more than 10%, accounting for 47% of apparent national steel consumption. Mexico´s apparent steel consumption increased 6.6% in 2015.
- On average, payments in the Mexican steel and metals industry take 90 to 120 days. Payment delays have increased over the last 12 months due to steel price volatility and slower economic growth. That said insolvencies have remained stable, and no increase is expected in the coming months. The level of protracted payments, however, is expected to remain high.
- External risk factors for the Mexican steel industry remain the volatility of the currency exchange rate as well as international metals prices, together with uncertainty concerning China’s economic performance and oil price developments. International competitiveness of the Mexican steel industry is hampered by the subdued quality of infrastructure, informality that prevails in the recycling industry and energy costs.
- As in previous years our underwriting stance remains cautious, especially due to potential exchange rate and steel price volatility. In order to accurately assess a credit limit application in this sector, we currently ask for audited financial statements for the year 2015 and management accounts for 2016. If audited financials are not yet available, we could consider year-end 2015 and 2016 management accounts signed by a company director, together with the most current interim financial information. Some underwriting cases can be supported by trading experience and/or guarantees or promissory notes (pagarés).
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