Transcript Template Ternium

From NAFTA to an Integrated
North American Steel Market
Rafael Rubio
NASPD Fall Conference
Cancun , Mexico
October 11, 2007
October 11, 2007
Agenda
I. Economic Integration
II. Where do we come from?
III. Where are we now?
IV. Where are we heading for?
October 11, 2007
2
I. Economic integration
● Integration is a process rather than a single act.
● The NAFTA steel sector can, and should, deepen its
integration and movement toward the formation of
one regional market:
─ Increasingly interdependent.
─ Enhance competitiveness.
─ Face common challenges form abroad.
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3
How can 3 markets can be integrated?
Two ways:
● Market Way:
3 markets can become a single one when companies
have investment or customers in the other markets and
make no geographical distinctions in their operations.
● Institutional Way:
When governments create the instruments and
institutions that drive 3 markets into become a single
one.
● Steel sector has been moving along those two ways.
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4
II. Where do we come from?
● Fred Telmer – CEO Stelco. Chairman North American
Steel Council (August 1992):
“We should be looking for open markets to increased
trilateral steel trade: we agree that open markets should
mean the elimination of steel tariff, non-tariff barriers and
other trade-distorting practices”.
● His proposal: a North American Steel Sector Agreement
as part of the NAFTA negotiations.
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5
NAFTA: timeline
● 1994:
NAFTA was the first step in Mexico's globalization.
For Mexico, It was more than a trade agreement.
● 1994 - 2004:
Mexico orientation was to signed more FTA (44
countries)
NAFTA was taken as “given”.
● 2005 (March):
Security and Prosperity Partnership of North America
(SPP):
Work together more effectively and efficiently.
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6
NAFTA: has been a successful story …
Mexico – USA Trade
Trade Balance
US Investment in Mexico
(Billion USD)
(Billion USD)
250
25
140
Accumulated
200
120
Exports
20
100
150
Imports
15
80
100
60
10
Annual
50
Trade Balance
40
5
0
2006**
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
-25
2007*
20
Source: Mexican Ministry of Economy Statistics with Mexican Central Bank Data
* 2007 Estimated from January – June 2007 data ** 2006 Data up to September 2006.
October 11, 2007
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… Changing our economy
Mexican Exports
(%)
1982
Manufacturing
Agricultural
25 %
5%
Oil & Mining
70%
2006
Oil & Mining
16%
Agricultural
3%
Manufacturing
81%
Source: BANXICO
October 11, 2007
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The Market Way in steel
● The steel trade between Mexico and the US has been
growing over time.
● Mexico has a surplus in some products and a deficit in
other. In some products, Mexico is the largest exporter
to the US Market.
● The US, on the other hand, is the largest exporter to the
Mexican market.
● BUT, there has been trade frictions. Less than in the
past. Current cases are in pipe and tube.
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Mexico – USA Trade
Finished Steel Products
(thousand metric tones)
3,000
Imports
2,500
2,000
Exports
1,500
1,000
500
Trade Balance
0
-500
-1,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007*
Source: Mexican Customs & CANACERO Statistics
* 2007 Estimated from January – July 2007 data
October 11, 2007
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Mexico – USA Trade
Flat Products
(thousand metric tones)
1,500
Imports
1,000
500
Exports
0
Trade Balance
-500
-1,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007+
Source: Mexican Customs & CANACERO Statistics
* 2007 Estimated from January – July 2007 data
October 11, 2007
11
Mexico – USA Trade
Weld Pipes
(thousand metric tones)
400
350
Exports
300
Trade Balance
250
200
150
Imports
100
50
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007*
Source: Mexican Customs & CANACERO Statistics
* 2007 Estimated from January – July 2007 data
October 11, 2007
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Mexico – USA Trade
Seamless Pipes
(thousand metric tones)
120
Exports
100
80
60
Imports
40
20
0
Trade Balance
-20
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007*
Source: Mexican Customs & CANACERO Statistics
* 2007 Estimated from January – July 2007 data
October 11, 2007
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Mexican Imports
USA Share of Total Mexican Imports
(%)
90%
80%
Weld Pipes
70%
60%
Finished Steel Products
50%
40%
30%
Seamless Pipes
Flat Products
20%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007*
Source: Canacero
October 11,
2007
* Estimated
from
January – July 2007 data
14
Mexican Exports
USA Share of Total Mexican Exports
(%)
100%
90%
Weld Pipes
80%
70%
60%
Finished Steel Products
Flat Products
50%
40%
30%
Seamless Pipes
20%
10%
0%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007*
Source: Canacero * Estimated from January – July 2007 data
October 11, 2007
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USA Exports
Mexico & Canada Share in Total USA Exports
(%)
70%
60%
Canada
50%
40%
30%
Mexico
20%
10%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007*
Source: AISI.
October 11,
2007
* Estimated
from
January – July 2007 data
16
The Institutional Way …
NAFTA Negotiations
American Iron and Steel Institute
North American Steel Council
October 11, 2007
17
… some examples
● North American Steel Council: a forum in which
Directors from Producer Members located in Canada,
Mexico and the United States can discuss public policy
issues relating to the North American Free Trade
Agreement (NAFTA).
● Section 201: Temporary safeguard imposed by the US
government in March 2002. Mexico and Canada were
excluded because of NAFTA.
● OECD Steel Committee: NAFTA worked as a group on
common issues.
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III. Where are we now?
● The Market Way: Trade + investments + consolidation =
have increased market integration
Steel companies with
facilities in 2/3 countries
- Arcelor Mittal
- Gerdau
- US Steel
- Ipsco (SSAB)
- Timken
- Essar
- Tenaris
- Ternium
October 11, 2007
Steel Users with
facilities in 2/3 countries
- Caterpillar
- Auto companies
- Magna International
- Tyco International
- Associated Spring
- Lincoln Electric
- Home Depot
- Hubbell Electric
- Palliser
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The Institutional Way …
North American Steel Council
In December 2002, the NAFTA governments pledged to identify
areas in which they might work together to promote more
openness in the North American steel
market and cooperation on steel trade and industry policies
North American Steel Trade Committee
October 7, 2003 ─ Mexico City, November 21, 2003.
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… Developments
North American Steel Trade Committee
Security and Prosperity Partnership of North America
- Economics and security are intertwined.
- New economic rivals: China and India.
- Work has to be strategic and realistic.
North American Competitiveness Council
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North America is losing market-share in
world trade …
Region
North
America
EU
Asia Pacific
South
America
October 11, 2007
World Trade
Share %
Share %
Growth
2000
2006
Rate (%)
22.1
17.3
(21.8)
37.9
37.9
0.02
18.3
21.3
16.4
2.4
2.6
9.3
22
… Loss of international competitiveness in the US market …
20
US imports
1993-2006
19.1%
Canada
16.3%
China
15.5%
17
14
Mexico
10.6%
11
8
5
6.8%
5.4%
2
1993
October 11, 2007
1996
1999
2002
2005
23
… As well as versus other competitors
BRICs vs. Mexico
% Change (2000 – 2006)
Exports
GDP
FDI
Brazil
150
19
229
Russia
131
44
946
India
124
50
310
China
289
75
72
Mexico
51
15
13.8
Source: : WTO, IMF and UNCTAD
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IV. Where are we heading for?
Market Way
Trade, Investment
and
Consolidation
Institutional Way
NASC/NASTC
NACC
SPP
Declaration of Governments (2006):
Steel: A Strategic Partnership – A Strategic Industry
North American Steel Strategy
October 11, 2007
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North American Steel Strategy …
● Implement a North American Steel Strategy to benefit
the North American steel industry by pursuing the
elimination of external trade distortions, reducing the
costs and the risks on intra-NAFTA trade, and promoting
competitiveness and productivity.
● Sectoral approach: steel, pork, consumer electronics
and chemicals.
● NAFTA Commission (August 14, 2007): the North
American steel market is highly integrated and the
industry in all 3 NAFTA countries share common interest
and concerns.
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… Next steps
● Areas of work:
─ External trade
─ Internal trade
─ Competitiveness and productivity
“We should be looking for open markets to increased
trilateral steel trade: we agree that open markets
should mean the elimination of steel tariff, non-tariff
barriers and other trade-distorting practices”.
October 11, 2007
27
From NAFTA to an Integrated
North American Steel Market
Rafael Rubio
NASPD Fall Conference
Cancun , Mexico
October 11, 2007
October 11, 2007
China Trade in Pipe and Tube
Weld Pipes
Seamless Pipes
(thousand metric tones)
(thousand metric tones)
3000
4000
3500
2500
Exports
Exports
3000
2000
2500
2000
1500
1500
1000
Imports
Imports
1000
500
500
0
0
Trade Balance
-500
Trade Balance
-500
-1000
2002
2003
2004
2005
2006
2002
2003
2004
2005
2006
Source: Mexican Customs & CANACERO Statistics
October 11, 2007
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