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Mexico: lower volumes temper price declines

The Mexican economy has surprised analysts with a strong showing in the service, construction and automotive sectors. The GDP forecast for 2023 has been revised upwards from 2.6% to 3.2%.    

The auto industry built 13.5% more light vehicles through the third quarter of this year when compared to the same period in 2022; in September alone, production growth was 24%. However, the spreading United Auto Workers strike in the USA is being observed with concern by all involved in the automotive industry supply chain. In Mexico, no effects on demand have been felt as yet but, as the strike drags on and extends to more plants, there is a growing risk some impact might be felt.

At the time of writing, the peso exchange rate stands at MX$ 18.17 to the US dollar; during the last 30 days, the lowest value has been MX$ 18.2613 on October 5 and the highest MX$ 17.07 on September 15. A higher exchange rate benefits exports and is a further headwind for domestic prices.      

Values for scrap grades related to secondary aluminium production have shown only modest weakness despite significant declines in reference prices for A380 and A356 ingots. The fact that only limited volumes of scrap are coming through yards is providing support to prices that otherwise would be seeing sharper declines. Many yards report that their non-ferrous volumes are down between 20% and 30% compared to last year.