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Mexico: economy still short of pre-pandemic levels

During the first quarter of this year, the Mexican economy grew by only 0.9%, with forecasts for full-year 2022 of just under 2%. This is disappointing for an “emerging” economy that is yet to recover to pre-pandemic levels.    

Light vehicle production contracted 6.6% during April compared to the same month last year, whereas year-to-date auto production grew 0.9%. The Mexican peso exchange rate has remained relatively stable at between MX$ 19.81 and MX$ 20.32 to the US dollar over the last 30 days.

Mexican producers of secondary aluminium alloys destined for the auto industry continue to enjoy plentiful imports of US scrap; this is being accentuated by a dropping Midwest premium in the USA. Demand for 6000 series scrap used to produce aluminium billet has been robust over recent months, attracting imports not only from the USA but also from South America and Europe. At present, some buyers are taking a pause to re-evaluate demand and to consider the risk of a dropping LME market; it will be interesting to see if demand regains its robust tone.   

Other issues in Mexico include the availability of enough electricity to support a growing industrial base. The current government has walked back reforms that were aimed at bringing more power to the market in a bid to strengthen the monopoly of the government-owned power company. Meanwhile, security concerns have flared up in several Mexican states.