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Sensing a Changing Wind, Gerdau Cancels Mexican SBQ Project
05/04/2025 - Gerdau has dropped plans to build a 600,000-metric-ton special bar quality mill in Mexico, saying that the project is too risky because of anticipated shifts in the automotive supply market.
“I think that there will be a very deep reconfiguration of the automotive platform in the next few years,” said chief executive officer Gustavo Werneck, explaining that it remains to be seen how the supply chain will change as a result of tariffs and the response to them as well as whether Mexico will remain a platform to provide auto parts to the U.S.
“There is a lot of uncertainty in the market right now, but we are certain that there will be a reconfiguration. Therefore, it doesn't make sense for us to invest in Mexico, bearing in mind that we still have some capacity to be used in the U.S. Therefore, we are canceling that Mexico investment.”
Across the border, however, the company said trade policy so far is having a positive effect.
“The reapplication of Section 232 tariffs has led to a significant increase in demand, due to a rebalancing of supply and stocking within the sector. In addition, we saw greater demand for higher value-added products, leading to improved sales mix in the period," the company said in its first-quarter earnings release.
"Despite the still uncertain scenario regarding the U.S. economy, we saw our order backlog rise, ending the quarter above 70 days, the highest level since 2022,” the company said.
“There is a lot of uncertainty in the market right now, but we are certain that there will be a reconfiguration. Therefore, it doesn't make sense for us to invest in Mexico, bearing in mind that we still have some capacity to be used in the U.S. Therefore, we are canceling that Mexico investment.”
Across the border, however, the company said trade policy so far is having a positive effect.
“The reapplication of Section 232 tariffs has led to a significant increase in demand, due to a rebalancing of supply and stocking within the sector. In addition, we saw greater demand for higher value-added products, leading to improved sales mix in the period," the company said in its first-quarter earnings release.
"Despite the still uncertain scenario regarding the U.S. economy, we saw our order backlog rise, ending the quarter above 70 days, the highest level since 2022,” the company said.
