Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Latin American steel producer Ternium’s steel shipments decreased 6pc to 3.0mn mt in Q1 2020 compared to 3.2mn mt in Q1 2019 but increased 3pc from the previous quarter. Iron ore shipments increased to 993,000, up by 8pc both compared to the prior year quarter and Q4 2019. 


Ternium anticipates a reduction of revenues (EBITDA) in Q2 2020 due to a significant decline in shipments to its main markets. The company’s EBITDA margin is also expected to decline below the 13pc achieved in Q1 2020. Ternium expects a gradual increase in volume and improved steel prices in May as automotive and industrial customers restart production. Overall demand is expected to remain below normal rates through Q2 2020, according to Ternium’s Q1 update.


In Mexico, the company’s main steel market, shipments were 1.6mn mt in Q1, up 6pc over the same period in 2019 and up 7pc compared to Q4. Ternium South, which includes Argentina and Colombia, shipped 379,600mt, down 14pc compared to 442,300mt in the same period in 2019 and down 22pc from the prior quarter. Argentina and Colombian markets were affected by mandatory production lockdowns that forced facilities to operate at technical minimums since March 20. In other markets, Ternium’s steel shipments were 968,900mt in Q1, down 19pc from the prior year and but up by 9pc from Q4. Changes in shipment volumes were driven by changes in slab volumes shipped from Ternium’s Brazilian unit to third parties. Terniums’ Brazil slab facility is also operating at a technical minimum due to lower forecasted demand. 


Ternium’s net sales declined 17pc to $2.3bn in Q1 2020 from $2.7bn achieved in the prior year quarter. However, sales did increase a nominal 1pc against sales in Q4 2019. As a percent of sales, Mexico contributed 56pc, South 15pc, and other markets 26pc with mining as the remaining segment. Sales from mining were $94.3mn in Q1 2020 up 24pc from $75.8mn in Q1 2019.


Operating income tumbled as it dropped 56pc from $307.3mn in Q1 2019 to $135.7mn in Q1 2020, although it did increase 47pc compared to $92.2mn in Q4 2019. EBITDA declined 36pc from $470.0mn in Q1 2019 to $302.1mn in Q1 2020, but increased 15pc against $263.1mn in Q4 2019. EBITDA margin as a percent of net sales declined from 17pc in Q1 2019 to 13pc in Q1 2020 with EBITDA per ton following suit at $146.7/mt to $100.8/mt, respectively. Ternium recorded a loss of 19.4mn in Q1 2020 against positive net results of $224.9mn in Q1 2019 and $89.9mn in Q4 2019. The loss was accentuated by the significant depreciation of the Mexican peso and Brazilian real against the US dollar. 


The company postponed several capital expenditure projects across its facilities including delaying the startup of the new hot-rolling mill in the Pesquería unit in Mexico to H2 2021 and the new steel bar and coil mill in the Palmar de Varela unit in Colombia to H2 2020.

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