Steel Prices Resume Decline as Mexico Imposes New Tariffs on Imports

Tariff Shock from Mexico

In a significant blow to global trade flows, Mexico has imposed a 50% tariff on steel imports from countries with which it has no free trade agreement, including major producers like India and China. This move is intended to protect domestic industry but is expected to disrupt supply chains and force exporters to find alternative markets, potentially creating a supply glut in other regions.

Chinese Demand Weakness

Simultaneously, the Chinese steel market continues to struggle. Rebar futures have hit one-month lows as the construction sector remains in the doldrums. With winter approaching, construction activity is slowing further, leading to a buildup of inventories at mills. The lack of robust stimulus measures from Beijing has left the market without a clear catalyst for a rebound.

Profitability Squeeze

Steelmakers are feeling the pinch, with reports indicating that less than 40% of mills in major producing hubs are currently operating at a profit. The combination of high raw material costs (iron ore and coking coal) and falling finished steel prices is compressing margins, likely leading to production cuts in the coming weeks.