The evident trend toward regionalizing manufacturing worldwide is expanding business opportunities for the Mexican metalworking industry. Although it is an industry that has developed extensively in recent years, the increase in volume will mean new challenges for manufacturers.
In Mexico, the automotive industry has grown significantly in recent decades and has also been a driver of the development of the metalworking industry. From different latitudes of the country, metal components and subcomponents are produced to be incorporated into automotive assembly lines, not only for facilities located in the Mexican territory but also for abroad, mainly the USMCA area, particularly in higher volume, to the United States.
Concerning metal products, in Mexico, 58.4 billion dollars have been produced in the first three quarters of 2022, with components such as die-cut parts, components for gearboxes and engines, as well as axles and components for differentials, which are metal products that require machine tools for both chip removal and manufacturing and forming metal.
Another case is the household appliance industry's development, which grew 171% between 2014 and 2019 and demands a considerable amount of metal components. Due to that, Mexico became the 5th global supplier of household appliances, with an estimated production of 14.8 billion dollars, only surpassed by China, Germany, the United States, and Italy.
Almost half (49%) of this manufacturing in Mexico are major appliances, such as air conditioning systems. Only 42% are white goods and refrigeration; the rest are minor belongings, according to information shared by the Cluster of Appliances of the State of Nuevo León (CLELAC).
Die-cut and stamped parts, as well as sheet-forming parts in general, are among the most demanded in the production of household appliances. The appliance industry supply chain has been strengthened in Mexico. In Nuevo Leon itself, there are established around 350 companies dedicated to stamping, die-cutting, sheet metal, pipeline, and metal profiles, as well as wire forming and coatings, as said in CLELAC’s reports.
In general, after the pandemic caused by COVID-19, the manufacturing industry began to resume its growth curves, and the process of regionalization of manufacturing could accelerate this rebound in the coming years. Mexico, with clear competitive and comparative advantages, such as its geographical position, the development of production chains, and the ground gained in knowledge and production techniques, is reflected in the operational efficiency of companies in the country and supported by increasingly qualified labor. This situation seems like a dream scenario.
The phenomenon of production relocation seeks to reduce costs (containers coming by sea from Asia, which cost around USD 1,500 in 2019, can currently exceed USD 15,000), protect intellectual property (needless to say, the number of patents copied in China), and generate certainty, since events the commercial, political tension between China and the United States, or the war between Russia and Ukraine, have jeopardized the flow of production from manufacturing chains. Again, the Mexican industry plays a crucial role in this process, becoming a vital production hub for the United States.
Technological reconversion will undoubtedly facilitate companies to capture these business opportunities. However, the appropriate selection must be careful and according to the projects captured. For companies dedicated to the production of metal components, as mentioned in the automotive and household appliance cases (there are others not exposed here, such as machinery, electric motors, and aerospace), there are business opportunities in parts with metal forming, welding, pipeline, metal profiles, and surface finishes.
Many companies starting back in the 90s, with small workshops and one or two machines, today occupy warehouses of more than 1,000m2 and generate more than 50 jobs. These companies, some of which are already opening the space to second generations, face the challenge of consolidating. Still, there is also a business opportunity for other small workshops to grow and be part of this new organic expansion of production chains in Mexico.
FABTECH Mexico is a great opportunity for all these companies to access the latest technology for metal working industry, FABTECH will take place in Mexico city, may 16-18, 2022.