Analyzing Mexico's Fastener Industry | FASTENER EURASIA MAGAZINE
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Mexico Analysis

Mexico is the second largest after Brazil and the 15th largest economy in the world. In Mexico, the world's 10th largest oil producer, the oil sector accounts for 15% of the country's export revenues and 40% of government revenues. Other major export products include road vehicles, machinery, furniture products, silver and other precious metals, avocado, lemon, watermelon, walnut, strawberry, coffee and cotton.
 
The most important trading partners of Mexico are the USA, the People's Republic of China, Japan, Canada, and Germany. Mexico makes more than 80% of its exports to the United States. It is estimated that about 37 million people of Mexican origin live in the United States. The remittances sent by the Mexicans working abroad to their families have been one of the important sources of income for their relatives in the country. In 2016, 26.96 billion US dollars are known to be entered into Mexico.
 
Mexico has signed a Free Trade Agreement (FTA) with 46 countries. More than 90% of its trade is carried out in countries where it has FTA. The efforts to diversify Mexico's foreign trade include the Pacific Alliance and the Trans-Pacific Partnership (TPP), signed between the five countries of the Pacific Ocean including Mexico on October 5, 2015. In 2016, 92% of the tariffs were lifted between four members of the Pacific Alliance founded by Mexico together with Columbia, Chile, and Peru, together.
 
Mexico is also one of 23 countries participating in the Treaty on Trade in Service (TiSA) negotiations since 2012. In 2018, the Government of Mexico aims to finalize the ongoing negotiations with the EU, Brazil and Argentina, as well as negotiations on updating the North American Free Trade Agreement (NAFTA) with the US and Canada.
 
The Mexican Peso was the most depreciating currency in 2016 due to the recession in the American economy, the decline in oil prices and the public deficit. According to the 2017 World Bank Report, Mexico is ranked 49th in the world in terms of ease of doing business and 51th in the World Economic Forum's (WEC) Global Competitiveness Report.
 
Automotive Industry
 
Mexico, Latin America's 1st, the world's 7th largest motor vehicle manufacturer, is also an important market in the automotive sector with a population of approximately 130 million. As of 2015, the Mexican motor vehicle park is approximately 37.4 million units. The number of vehicles per 1000 people in Mexico is still not very high and as of 2015, it is 294. Motor vehicles are generally imported from the US. Therefore, the average vehicle age is one of the highest in the world.
 
 
The total number of motor vehicles produced in the country increased by 13% in 2017 and amounted to 4 million 68 thousand units. According to OICA data, 1.9 million of them are passenger cars and 2.1 million are commercial vehicles. The country is one of the major commercial vehicle manufacturers in the world. Mexico has surpassed Brazil, the significant rival in the region, with its production figures, especially in the last three or four years. Mexico's motor vehicle production is in close contact with the US market, and an average of 70% of the vehicles produced in the country are exported to the US. The improvement observed in the US economy brings new investments to Mexico. Lately, Mazda and Honda have made new investments in the country. Brazil and Argentina's quota applications for automotive imports from Mexico cause unease for Mexico in the Latin American market. On the other hand, the growth in the EU market is positively reflected in Mexico's exports to EU countries. However, the biggest danger to the Mexican automotive industry seemingly is the fact that with Trump's presidency in the United States, the potentially the investments in Mexico to be blocked, and some producers may shift their production to the US altogether.
For this reason, for Mexico, which is expected to reach 5 million units by 2023, reaching these figures is imperiled with the recent developments in the United States. The largest passenger car manufacturers in the country are Nissan, VW and Ford. Chevrolet, RAM, GMC and Nissan are the most important HTA manufacturers.
 
In parallel with a large number of foreign OEM investments in the country, there is also a considerable amount of subsidiary industry investments. However, like in the main industry, it is directly dependent on the US market in the sub-industry. Adverse developments in the USA also directly affect the Mexican automotive supplier industry. Major sub-industry producers in the country are: BASF (paint), BorgWarner (automatic powertrain, turbochargers) Cooper Tire (tires) Continental (interior material), Delphi (electronic and mobile communication parts, safety equipment, heating and electrical parts), Denso (air conditioning parts), Johnson Control (battery, door systems, seating and storage parts, vehicle control systems) Lear (interior material), Michelin (tires), ZF-TRW (airbags, brakes, cruise control systems, drive assistant systems, sensor technologies), Visteon (air conditioning systems, security modules, lighting, in-car entertainment systems).
 
As a result of all of Mexico's investments, automotive exports are increasing rapidly. The country's automotive exports, which were just over 50 billion USD in 2010, increased to 102 billion USD in 2017. Of these, 41.7 billion USD is composed of passenger cars and 24.6 billion USD is composed of motor vehicles for transporting goods. In 2017, the country's 8708 chapter’s sub-industry exports amounted to 26.7 billion USD.
 
Mexico also exported 6.7 billion USD of tractors in 2017. In 2017, the country's imports in the 87 chapters were 41.6 billion USD. In terms of the country's imports, the automotive supplier industry ranks first with 25.3 billion USD. On average, 60% of the country's total automotive imports consist of the products of the automotive supply industry. In 2017, the country's passenger car imports amounted to 11.5 billion USD. Another important import item of the country is motor vehicles for carrying goods with 2.2 billion USD.
 
Energy Industry
 
In Mexico, there is potential for development of the energy sector both in terms of investments and labor and the production of necessary technologies. Mexico has an installed capacity of 185 megawatts in wind energy and has a production potential of about 40,000 megawatts. In terms of solar energy, Mexico has great potential due to the fact that it is one of the countries with the most sunshine in the world. As a matter of fact, 90% of the country's territory receives an average of 5 kw/hour daylight per m2. Mexico is also the third in the world in electricity generation from geothermal sources. The capacity of 843 megawatts in this area can be increased to 2,400 megawatts. 11,300 megawatts of 53,000 megawatts of hydroelectric energy potential are installed.
 
 
Exports
 
  The main export products of Mexico are crude oil (9.1%), passenger cars (8.2%), motor vehicles (5.7%), motor vehicles for transporting goods (5.4%), automatic data processing machines (5.2%), TV receivers and monitors (4.2%),  telephone devices and other devices for exchanging sounds, images or other information (4%). 
 
Imports
 
Approximately 75% of the country imports consists of intermediate goods, 15% of consumer goods and 10% of capital goods. Processed petroleum products (6.1%); road vehicles (5,8%); integrated electronic devices (3.5%) and telephone devices and other devices for exchanging sounds, images or other information (3.4%) are the main products of the country's imports. 
 
In general, Mexico's imports are mainly based on machinery, automobiles, electrical-electronic products, plastic goods, pharmaceuticals, optical devices, automotive supply industry, iron and steel products, organic chemicals, plastic packaging materials and motor vehicles for transporting goods.
 
 
Mexican Steel Industry
 
In 2017, Mexico was the world’s eleventh-largest steel importer. In 2018, Mexico imported 11 million metric tons of steel, a 2 percent increase from 10.8 million metric tons in 2017. Mexico’s imports represented 3 percent of all steel imported globally in 2017. Mexico’s 2018 steel imports were just over a third of the size of the largest steel importer, the United States. In value terms, steel represented just 2.4 percent of the total amount of goods imported into Mexico in 2018. Mexico imports steel from over 95 countries and territories. 
 
Between 2009 and 2018, Mexico’s crude steel production grew by 43 percent from 14.1 million metric tons to 20.2 million metric tons. Apparent consumption (a measure of steel demand) has increased from 15.7 million metric tons in 2009 to 25.5 million metric tons in 2018. The gap between production and apparent consumption has increased since 2009, growing from -1.5 million metric tons in 2009 to -6.2 million metric tons in 2015. Since 2015, this gap has shrunk slightly, decreasing from -5.8 million metric tons in 2017 to -5.3 million metric tons in 2018. Between 2009 and 2018, Mexico’s import penetration increased from 32.4 percent to 43.1 percent.
 
Mexico’s Steel  Import
 
Between 2009 and 2012, the volume of Mexico’s steel imports nearly doubled. Since then, imports have increased modestly. In 2018, imports increased by 2 percent to 11 million metric tons from 10.8 million metric tons in 2017. Similarly, the value of Mexico’s imports increased by 8 percent to $11.3 billion in 2018, from $10.4 billion in 2017. Flat products account for nearly two-thirds of Mexico’s 2018 steel imports, at 62 percent or 6.8 million metric tons. Semi-finished products accounted for 13 percent (1.5 million metric tons) of Mexico’s 2018 steel imports, followed closely by long products (13% or 1.5 million metric tons), stainless steel (6% or 665 thousand metric tons), and pipe and tube products (5% or 583 thousand metric tons).
 
The top 10 source countries for Mexico’s steel imports represented 90 percent of the total steel import volume in 2018 at 9.9 million metric tons (mmt). The United States accounted for the largest share of Mexico’s imports by source country at 32 percent (3.5 mmt), followed by Japan at 15 percent (1.6 mmt), and South Korea at 14 percent (1.6 mmt). The United States has been the largest source of Mexico’s imported steel since at least 2005.
 
In 2018, the volume of Mexico’s steel imports increased from 6 of the top 10 sources, while the value of imports increased from 7 of the top 10 sources. Notable 2017 to 2018 increases in the volume of Mexico’s imports include those from Brazil (697%) Russia (362%), the Netherlands (60%) and Canada (40%). During this period, Mexican imports by volume notably declined from the Japan (-30%), China (-23%), Taiwan (-23%) and the United States (-11%). Between 2017 and 2018, imports increased the most in value terms from Brazil and Russia, up 504 percent and 399 percent, respectively. Outside of the top 10 sources, other significant changes in Mexico’s import volume included 13th-ranked Austria (63%), 14th-ranked India (-50%), 16th-ranked Vietnam (-39%), and 24th-ranked Indonesia (1336%).
 
Mexico’s Steel  Export   
 
In 2017, the share of steel exports sent to Mexico from its top import sources increased in 6 of the top 10 sources. The share of South Korea’s steel exports to Mexico showed the largest increase (up 0.8 percentage points), followed by Taiwan (up 0.4 percentage points), and Germany (up 0.4 percentage points). Export shares to Mexico in Japan, China, and Spain each increased by less than one-third of a percentage point. Canada’s share of steel exports to Mexico decreased the most with a decline of 0.9 percentage points, while export shares in India, the United States, and Italy each all decreased by less than a percentage point. Among Mexico’s top import sources, the United States and Canada sent the 2nd largest shares of their total steel exports to Mexico in 2017. Flat products accounted for the largest shares of exports to Mexico from the United States at 70 percent (2.7 million metric tons), while long products accounted for 61 percent (284 thousand metric tons) of Canada’s exports to Mexico. 
 
Source: International Trade Administratio.
 
MEXICAN FASTENERS MARKET
 
Mexico remains one of the most strategic markets with opportunities to reach North America.
 
The consumption of fastener in Mexico is firmly connected to US industrial fastener consumption. The reason for this is that mostly fasteners are not produced for the Mexican market. The majority of finished industrial products assembled in Mexico (automobiles, machinery, building parts, white goods, etc.) are for export and most of the exports are for the North American market.
 
The Mexican production response to competition with China has been an increased capacity in high-quality products such as automotive, electronics, medical devices, and other mounting components. Industrial manufacturing companies that consume metal screws, nuts, bolts are looking for additional suppliers in many cases to meet the increasing volume and for on-time delivery.
 
Industrial fastener consumption in Mexico has two important features. First, the industrial fasteners used in Mexico have a great chance to make their way to the American Market, regardless of where they are brought. 83% of Mexican manufacturing takes place for exporting to North America. (80% USA, 3% Canada).
 
Every major automaker has invested significantly in Mexico. The business relations in Mexico are a platform to reach additional US opportunities, as well as to make a presence in the growing American market.
 
In Mexico, there is an attitude that encourages the supply of fastener from local suppliers within the country. Of course, the big US manufacturers have local Mexican facilities, but the demand is increasing and the firms and facilities owned by the Mexicans continue to increase.
 
China and Taiwan aim to establish strong dealer relationships as well as supply through local partnerships as international leading regions of fastener manufacturing. Whereas in Mexico, because there is still a big area for the growth, the companies of this region actively research direct supply relationships and use local dealers. 
 
Main importing markets for fasteners exported by Mexico in 2018
 
Mexico's exports represent 0.4% of world exports for fasteners and its ranking in world exports is 27.
 
USD thousands
 
 
Main supplying markets for fasteners imported by Mexico in 2018
 
Mexico's imports represent 6.7% of world imports for fasteners and its ranking in world imports is 4.
 
USD thousands