The Steel Market in Mexico: 1980-2015

In 2015, world steel production was 1,620.4 million tons; China is the main producer (49%), followed by Japan (0.06%). World exports are concentrated in China and Japan with 33%, Mexico imported 17% of those made by North America; what impacts on the internal dynamics of the steel market. To determine the effect of the change in the main factors that explain the Mexican steel market; as well as quantifying the level of impact of the international price of this commodity on the steel wholesale price in Mexico, a model of simultaneous equations was estimated with annual information from 1980 to 2015; composed of 5 regression equations and an identity. The results indicate that in the short term steel consumption and production in Mexico responds inelastic (-0.1284%) and elastically (2.3863%) before changes of 1% in the corresponding prices. The changes in the price of the factors that most affect consumption are the urbanization process, the national income per capita and the price of housing with price-cross elasticities of 0.4843, 0.4544 and 0.3762; and to production are the electricity tariff and the price of oxygen to produce steel with cross-price elasticities of -4.0917 and -1.6371. The effect of the international price of steel and the cost of transport in Mexico, affect the wholesale price at a level of 0.05 and 1.05%, for each unit percentage.