How has Roca Acero evolved as a business over the past several years?

The Roca Acero Group is now a group of companies and we still focus on the scrap industry. We consider ourselves the largest independent scrap operator in northern Mexico. We operate in two clusters, including a northern cluster that encompasses the Monterrey area and a central cluster that spans from San Luis Potosí to Puebla. Also, because of the transition from foundries to electric arc furnaces, scrap has become a more desirable material. Mexico consumes about 30 million tonnes (mt) of steel per year, 10 million of which comes from scrap, and we see this as a big opportunity. Roca Acero has grown by at least 100% over the past five years, and we attribute much of this growth to the pick up in the automotive industry in the central cluster. Mexico’s GDP growth rate is around 2.3%, but in the areas where we are, it can be as high as 8%. Roca Acero currently supplies about 35,000 to 40,000 mt of scrap per month, but we are operating at about 70 to 80% of our full operational capacity.

What are the main challenges that scrap companies face?

The scrap industry varies according to logistical costs and logistics costs are the highest costs we have to worry about. Mexico’s rail system is very inefficient and we yield about 10% of scrap per year to robbery. In fact, it is often cheaper to import commercial scrap from California or export busheling to the US than it is to transport within the country. This year, our strategy to reduce logistics costs is to diversify our customer portfolio by including more niche markets, such as auto parts foundries and other “boutique” foundries. The steel industry, in general, is historically very fragmented, but we have seen this changing gradually.

How have macroeconomic events, such as NAFTA renegotiations and increased demand in the automotive industry, affected the scrap industry?

While Mexico’s GDP has been growing at a rather slow rate, certain regions are growing faster than others. The central cluster’s GDP has been growing at a rate of about 7 – 8%, thanks to automotive manufacturing and demand from the US. As a result, industrial scrap and busheling generation has been up over the past decade. We export about 20% of our total volume to the US. We expect the total scrap demand in both Mexico and the US to continue to grow, particularly in the busheling market because automotive plants require high-quality material. In general, the “Trump Effect” has had the biggest positive short-term impact on the steel market because of the infrastructure promises the current US administration has made.

What are the benefits of buying scrap through Roca Acero if steel mills can acquire it directly from manufacturers?

The scrap industry involves a whole value chain, including collectors and inventory operators, that require different expertise and capabilities that most steel mills do not have. Roca Acero’s main value addition is the integral service we provide. We have the machinery and equipment to sort entire cars into different types of scrap. Also, because of the volume of scrap we handle, we are able to use economies of scale to operate.

How competitive is the scrap industry in Mexico and what are Roca Acero’s competitive advantages?

In northern Mexico, Roca Acero has two main competitors at North of Mexico, Zimmer Recycling and Dimeca. Our main differentiator is that we focus on both the commercial and industrial aspects of the scrap industry, while most companies emphasize only the commercial or industrial aspect. We have also expanded our services to include non-ferrous materials so that our clients do not need to use two different companies. We offer our clients everything they need to handle their scrap, including the supply of scales, containers and cranes. We have plants in Querétaro and Saltillo in order to be closer to our clients. We are also certified by the Mexican Ministry of the Economy’s IMMEX program, which helps us save money on import taxes, provided we comply with certain industrial standards. Scrap operators who are not certified by the IMMEX program cannot work with some industrial scrap suppliers.

What has been Roca Acero’s most notable milestone since its inception?

Roca Acero began some 30 years ago as a small, family-owned company and we have lived through the many changes that came with globalization. But now, and most importantly, since some five years we have launched an intensive process of professionalization and implemented the best business practice in the industry in order to serve the markets better, especially industrial markets that demand professionalized and institutionalized suppliers with nationwide capacities and integral services to handle their scrap with impressive good results.