Economic analysis of Steel consumption in Mexico

Abstract

In 2016, the apparent world consumption of steel was more than 1,630 million tons. World exports of steel were concentrated by China and Japan with 22.8%, Mexico imported 21% of those made by North America; what impacted on the internal dynamics of its steel consumption. To determine the effect of the change in the main factors that explain the consumption of Mexican steel; As well as quantifying the level of impact of the international price of this commodity on the steel wholesale price in Mexico, a model of simultaneous equations was estimated with annual information from 1980 to 2016; integrated by 3 regression equations. The results indicate that in the short term the steel consumption in Mexico responds inelastically (- 0.2354%) before changes of 1% in the own price. The changes in the price of the factors that most affect consumption are the urbanization process, the national income per capita and the price of housing with price-cross elasticities of 0.5518, 0.4720 and 0.3596. The effect of the international price of steel and the cost of transportation in Mexico, affect the wholesale price at a level of 0.0513 and 1.0521%, for each unit percentage change in the first ones.