Kloeckner Metals' expansion in Mexico underpinned by nearshoring

Kloeckner Metals, a German company with a broad presence in the metallurgical industry in North America, recently opened its second production plant in Mexico, in the central state of Querétaro, driven by the nearshoring boom in the region.

The facility, strategically located in the O'Donnell Phase V industrial park near the airport, covers an area of 7,800m2, required an investment of US$40mn and adds to its first plant opened 17 years ago in Monterrey, Nuevo León state.

Roberto Mercado, the company's general manager in Mexico, explains in an interview with BNamericas that the new production unit will mainly serve growing demand from automotive manufacturers that continue to establish operations in the country, although it will serve all of North America.

Kloeckner's clients also include manufacturers of air conditioning equipment (HVAC), household appliances, telecommunications cabinets and electronics, among others, while Ternium and ArcelorMittal are its main suppliers.

BNamericas: How long has the plant been operating or is it going to start from scratch after the inauguration? What products will you be making there?

Mercado: We already started in January. We did initial tests there from November to December. We are dedicated to the purchase, processing and distribution of steel and metals, all types of steel, carbon steel, hot rolled, pickled, cold rolled, coated, galvanized, pre-painted, and non-ferrous metals such as aluminum and stainless steel.

This is the second plant in Mexico. The first one that was opened was in Apodaca in Nuevo León state. We've been there for almost 20 years, and this is the second one in Mexico.

BNamericas: Why did the need arise to build this second plant in Mexico? Why now? Was the decision motivated by the nearshoring phenomenon?

Mercado: Because of the growth we've had, because of the success we've had in the country. We already had clients here in Querétaro, in Mexico City, in Guanajuato, in Puebla, in Guadalajara, and it was a logistical challenge to supply them from Nuevo León.

We made this business decision years ago. It was due to the growth and domestic demand that we were experiencing, customer demand, particularly lots of customers who told us: I want you closer to where I am and I want to give you more business.

And of course, nearshoring now represents a greater opportunity than we foresaw. Many are already setting up in Nuevo León, but we also see that a lot of industry is arriving in various parts of the country, not just there.

BNamericas: How many jobs did you create at the Nuevo León plant and how many will you create at this new site? How much was the investment?

Mercado: In Nuevo León there are 60 employees ... but I think we're going to reach around 200 employees here in less than five years.

Here, including the land, the building, the machinery, the floor, which is very expensive because this floor is 8 inches thick for all the weight we handle, I think the investment was around US$40mn.

BNamericas: What is the estimated production volume and how do you see the behavior of demand for steel and finished products in Mexico and globally given the slowdown in the industrial sector in the United States in anticipation of a possible recession?

Mercado: This year, initially, we're going to sell 25,000t a year and the plan is to take that to 120,000t.

All our budget plans have been fulfilled. But it never ceases to be a matter of strategy and forward planning to see what's happening in the market.

I believe that demand is quite stable and ... I believe that much more demand is coming for the sector in Mexico with the investments made by producers such as Ternium, which is one of our main partners, ArcelorMittal in Lázaro Cárdenas, Nucor-JFE in Silao. Even the mills that are being established near the border at Texas Steel Dynamics.

Ternium accounts for a significant proportion [of supply], around 80%. It's the biggest producer here in Mexico.

BNamericas: Has the crisis that steel company AHMSA has been going through since last year affected you in any way?

Mercado: No, because we don't participate in that niche, in the sector in which AHMSA produces. What we have seen is that other producers such as Ternium have had to monopolize that demand, so the supply of production they have is somewhat restricted.

BNamericas: What are the company's expectations in the country? Do you see another possible expansion in the future? Another project in Mexico?

Mercado: Here in Querétaro it's very latent. We have the area to double the plant's size. We're already in talks with the O'Donnell Industrial Park to be able to receive an offer, a proposal ... for the company's construction. We're working with them as developers.