Ternium(TX)2025-03-28 20:20Steel Market Dynamics - Ternium's steel prices have shown significant volatility, with U.S. prices of hot-rolled coils dropping to 2,135 per ton in 2021[37]. - In 2023, Brazil experienced a 42% surge in flat steel product imports, primarily from low-priced Chinese steel, adversely affecting domestic production[42]. - High inflation rates and tighter monetary conditions in the U.S. and Europe have contributed to weaker demand for steel products in these markets during 2022, 2023, and 2024[36]. - Ternium's competition is intensifying, with competitors potentially expanding production capacity and investing in modernization, which could impact Ternium's market share[45]. - The company faces risks from excess steel production capacity, particularly in China, which could lead to depressed margins and industry weakness[41]. - Supply chain disruptions, such as those experienced in the automotive industry in 2021 and Argentina in 2023, have negatively impacted steel demand and sales[43]. Business Strategy and Investments - Ternium's business strategy includes significant investments and acquisitions across multiple countries, including a new industrial center in Pesquería, Mexico, and expansion plans in Brownsville, Texas[50]. - Ternium's growth strategy may be adversely affected if acquisitions or investments do not perform as expected or if integration challenges arise[52]. - Ternium's goodwill related to its Mexican subsidiaries amounted to 468.5 million[58]. - In July 2023, Ternium increased its participation in Usiminas, resulting in a non-cash net loss of 935 million loss related to prior stakes in Usiminas[59]. - Ternium's participation in Usiminas began in July 2023, consolidating its operations in Brazil, which could be impacted by local economic and regulatory developments[149]. Operational Risks - The ongoing geopolitical risks, including the Russian invasion of Ukraine, have led to disruptions in the global supply of slabs and other inputs, affecting Ternium's operations[47]. - Labor disputes remain a concern, with potential for work stoppages that could negatively impact Ternium's operations and financial results[62][64]. - Changes in foreign currency exchange rates could adversely affect Ternium's business, particularly as a significant portion of transactions occur in currencies other than the U.S. dollar[65]. - Ternium's operations in Mexico are at risk due to water scarcity and increased costs, particularly in areas affected by severe droughts, with new water use concessions suspended since 2022[79]. - Ternium's mining activities are subject to significant risks, including operational accidents and environmental liabilities, which could adversely impact profitability and result in material liabilities[85]. Environmental and Regulatory Challenges - The construction of Ternium's new steel slab facility in Mexico is expected to be completed by 2026, but may face delays and increased costs due to geopolitical risks affecting suppliers[54][55]. - Ternium's mining operations in Mexico faced significant challenges due to increased violence and crime, leading to the idling of its main mining operation during the first half of 2023[103]. - The company may experience increased costs and capital expenditure requirements due to factors such as changes in environmental regulations and diminished iron ore reserve grades[99]. - The Mexican Congress approved constitutional reforms in 2024 that could increase state control over key sectors, impacting Ternium's operations and market conditions[120]. - Ternium's operations are subject to significant regulatory risks, including environmental regulations that may increase operating costs and impact production[162]. Financial Performance and Economic Conditions - Ternium's ability to pay dividends is contingent on the financial performance of its subsidiaries, which could be adversely affected by legal and regulatory restrictions, particularly in Argentina[113]. - The Argentine government has announced plans for tax reform in 2025, which could increase the tax burden on Ternium's operations[142]. - Inflation in Argentina reached 118% in 2024, significantly affecting Ternium's cost structure and competitiveness[138]. - Ternium's financial results could be negatively impacted by changes in tax regulations and increased scrutiny from tax authorities globally[106]. - The U.S. government imposed a 25% tariff on steel imports from countries outside the USMCA region, which could adversely affect Ternium's operations and market dynamics[126]. Climate Change and Sustainability Initiatives - Ternium aims for a 15% reduction in emissions intensity by 2030 compared to a 2023 baseline, including Scope 1, 2, and 3 emissions[196]. - The EU's Carbon Border Adjustment Mechanism (CBAM), adopted on May 17, 2023, imposes a carbon levy on imports of certain products, including steel, from non-EU countries[172]. - New carbon pricing mechanisms in Mexico and Argentina could increase Ternium's production costs, affecting profitability and net results[177]. - Ternium is developing several projects aimed at reducing carbon emission intensity, but these projects may face delays or higher-than-anticipated costs[175]. - Ternium's environmental management system is certified under ISO 14001 and ISO 50001, ensuring compliance with environmental laws and regulations[226]. Community Engagement and Corporate Governance - Ternium invests in community programs focusing on education, culture, volunteer work, and health to foster sustainable growth in local communities[230]. - The company emphasizes transparency and ethical behavior through mandatory training programs and a Compliance Line for reporting violations[193]. - Ternium collaborates with small and medium-sized enterprises through the ProPymes program to strengthen its value chain and improve competitiveness[214]. - Ternium's community programs focus on education and technical training to support local development and social mobility[192]. - The company has centralized its processes on a unified IT platform, improving customer management through the digital marketplace "Ternium Activo"[221].