One of the most important sectors for our economy in the manufacturing industry is the metalworking industry. It represents between 14% and 17% of the manufacturing GDP, according to data from the Secretaría de Economía en México. Let’s look at the industry’s projections and the challenges it faces.
The outlook for the sector is very encouraging, and much optimism is due to the projects and investments that are about to arrive in the country in the automotive and aerospace sectors, potential sectors for the development of the metal-mechanic industry. Last year the metal-mechanic industry grew 4% and it is expected that this figure will double this year, expecting a growth of 8%.
The state of Queretaro together with the state of Guanajuato maintain good prospects for the metal-mechanic industry; Queretaro alone received 6,909 million pesos of FDI for the metal-mechanic parts manufacturing segment in 2022.
Challenges facing the metal-mechanic industry
A major challenge facing this industry is price volatility. Contracts must establish certain reserves in case the price of steel increases by up to 180%, since if such reserves are not established, companies could have very low profit margins or even losses.
Another challenge faced by companies in the metal-mechanic sector is the lack of support from the government. On average, these companies work at 50% of their capacity due to the conditions in which certain machines are found. What is needed is for this industry to have access to the development and renewal of equipment to be more competitive and productive.
These companies are looking for support from the government to facilitate the modernization of their equipment under accessible financing terms, where interest rates will not choke them.
One of the threats to the industry is the importation of metal-mechanical parts. Asian producers, supported by government subsidies, generate products of very low value with which the Mexican industry cannot compete.
In the last 10 years, 6,920 companies in the metal-mechanic industry have closed their plants, and among their main reasons are:
- Not being able to be competitive with Asian products subsidized by their government, but of very low quality.
- Other reasons why they have closed their doors have been due to the lack of governmental support and financing to modernize their work equipment, as mentioned above.
- And a third reason is found in organized crime and delinquency, where these companies are threatened for not agreeing to pay or continue to pay for the right to a floor or protection and are forced to close their establishments.
There are very good projections for this sector; however, government support is needed so that companies can continue to grow as expected and do not face circumstances that will cause them to close their doors or change their line of business.