Steel's Balancing Act

??? Mexico's Steel Resilience: Navigating Global Headwinds

As the global steel industry braces for a "winter" worse than 2008, Mexico emerges as a potential bright spot. This week, we're exploring how the country is positioning itself amidst industry turmoil.

Our analysis by Johan Petersmann reveals a complex landscape: from the bankruptcy of Altos Hornos de México (AHMSA) to new tariffs shielding domestic producers. Yet, we uncover promising trends: $5.7 billion in government investments, nearshoring opportunities with Tesla and GM, and Mexico's strategic advantage under USMCA. Could Mexico's steel sector turn global challenges into local triumphs?

As always, you're reading ConteNIDO, your go-to place for all things tech, AI, and Mexico/US. Make sure to subscribe to receive our up-to-date analysis ??

Nido Indicators ????????

Auto Exports: 292.67 on Aug 01, 2024 (??9.08% from Jul 01, 2024)

Consumer Confidence Indicator in Mexico: 47.60 on Aug 01, 2024 (??1.06% from Jul 01, 2024)

Consumer Confidence Indicator in United States: 67.90 on Aug 01, 2024 (??2.26% from Jul 01, 2024)

Federal Reserve Interest Rate: 5.50% on Aug 31, 2024 (??0.00% from Jul 31, 2024)

Bank of Mexico Interest Rate: 10.75% on Aug 08, 2024 (??2.27% from Jun 27, 2024)

USD-MXN Exchange Rate: 20.07 on Sep 10, 2024 (??6.59% from Aug 9, 2024)

S&P/BMV IPC: 51,136.05 points on Aug 26, 2024 ( ?? 52.61 points from Jul 26, 2024)

Inside Nido: What we are doing

This week we are welcoming a new member of the ConteNido team ! Welcome Johan Petersmann !

José Luis S. the pioneer of this project will continue onboard as ConteNido Editor!

We are looking for founding CTOs and CPOs to participate in our research, if interested please respond to our form.

Want to work for a Nido Portfolio Company?

Palomma:

Founding Engineer, Medellín

In the Know with Nido: What we are reading

?? Sheinbaum Appoints New Military Chiefs as Presidency Approaches

Mexican President-elect Claudia Sheinbaum has appointed General Ricardo Trevilla as defense minister and Admiral Raymundo Morales as Navy chief, emphasizing their extensive military backgrounds. This move reflects the military's growing involvement in national projects under the outgoing administration. Sheinbaum commended her predecessors and confirmed the importance of qualified leadership. (Reuters)

??? Carlos Slim Boosts Talos Energy Stake After CEO Departure

Carlos Slim has increased his ownership in Talos Energy to 23.8% by acquiring 2.7 million shares after CEO Tim Duncan's sudden exit caused a stock decline. The billionaire investor is also expanding his investments in the oil and gas sector, including a stake in US refiner PBF Energy. (Bloomberg)

???? Mexican Auto Industry Shows Strong Growth in August 2024

Mexico's auto production reached 352,615 units in August 2024, an 8.2% annual increase and the highest August output since 2018. Ford led growth with a 40.4% increase. Exports rose 1.6% to 292,670 units. The industry shows positive trends, surpassing post-pandemic recovery and potentially entering a new expansion phase. (El Financiero)

?? BMW's Hydrogen Revolution: Cars by 2028

BMW is set to introduce hydrogen-powered vehicles by 2028, partnering with Toyota to innovate fuel-cell technology. Despite challenges like high costs and limited infrastructure, the automaker sees hydrogen as a viable complement to electric vehicles, especially in areas with scarce charging options. Collaborative efforts aim to reduce production expenses. (Bloomberg)

?? Mexico Introduces New Regulations to Empower Small Business Listings

Mexico's securities regulator has greenlit new rules aimed at enhancing debt and equity listings for small and medium-sized enterprises (SMEs), potentially unlocking 70 billion pesos ($1.4 billion) annually. These reforms seek to simplify the listing process and boost financial inclusion, while also reviving the country's capital markets. (Bloomberg)

?? Anthropic Unveils Claude Enterprise: A New Contender Against ChatGPT

Anthropic has launched Claude Enterprise, a subscription plan tailored for businesses seeking enhanced security and administrative features. With capabilities such as large context windows, GitHub integration, and specialized workspaces, this new offering aims to compete directly with OpenAI's ChatGPT Enterprise, providing greater customization for enterprise demands. (Techcrunch)

??? Nordstrom Family and Mexican Retail Group Join Forces in $3.76 Billion Bid

The Nordstrom family, holding a 33.4% stake, proposes to take the retailer private in partnership with El Puerto de Liverpool. The $3.76 billion offer comes amid mixed sales performance, with a special board committee set to review the bid following Bruce Nordstrom's passing. (APS News)

?? Mexico: A Rising Data Center Powerhouse Mexico is positioning itself as a strategic hub for data centers, driven by its proximity to the U.S. and digital economy growth. By 2027, energy demand may soar to 1500 MW. Hitachi Energy is facilitating this expansion through renewable energy, digital innovation, and green hydrogen technologies to achieve sustainability goals.(Energia Estrategica)

In-depth with Nido: What we are thinking

If the global economy is a finely tuned machine, then steel is its fuel, holding together the infrastructure that keeps it running. No, really. You might not think much of it, but steel is everywhere—from towering skyscrapers to cars on the streets.

However, the industry today is facing significant challenges, driven by global competition, trade policies, and environmental shifts. Most recently, a warning from China Baowu Steel Group Corp—the world’s largest steel producer (more on Bloomberg)—has emerged as the Chinese property crisis kills domestic demand and propels a wave of steel exports. So, this week, we wanted to take a closer look at steel and why it matters. Moreso with the bankruptcy of Altos Hornos de México (AHMSA) and the failed acquisition of U.S. Steel by Nippon Steel highlighting the difficulties facing the industry globally.

Let's start with the basics.

The steel industry has always been critical to industrial strength. In 2023, the World Steel Association reported global steel production of 1.88 billion tons, with China outputting more than half (more on S&P Global). However, due to demand shifts stemming from the property crisis in China, the post-COVID interest rate environment, and protectionist trends, the number may soon be decreasing.

A recent warning from China Baowu Steel Group, which produces about 7% of the world’s steel, predicts a “winter” worse than the 2008 and 2015 downturns (more on Bloomberg). This is primarily driven by China’s prolonged property market slump. As we can observe in the chart below, steel margins are under pressure in China, prompting companies to sell in foreign markets.

China is expected to export 100 million tons of steel in 2024, the most since 2016, driving down global prices and squeezing foreign producers.

On that note, while AHMSA’s collapse in August 2024 was largely credited to fraud and mismanagement (more on Milenio), cracks began to show when low steel prices in the late 1990s led to one of the largest and most complicated debt restructurings in Mexico’s history (more on Willkie Farr and Gallagher LLP), showcasing the serious consequences a downturn in steel, like the one predicted by Baowu, might have on the industry today.

Read the Full Article Here

That’s it for this week. Make sure to subscribe to ConteNIDO to learn all the crucial information about LatAm and entrepreneurship.

And, if you are a founder seeking to start a conversation, don’t hesitate to reach out: https://www.nido.ventures/contact-us