Published by:Amy Hinton<>
2 Jun 2025 @ 19:20 UTC
Mexico has been chosen as a strategic production hub by multiple entities along the global automotive supply chain, capitalizing on favorable labor costs and the country’s status as a strategic Latin American trade hub, with nearshoring still a prevalent theme in the region.Despite the uncertainty generated by recent moves concerning import tariffs, Mexico remains a popular destination for nearshore manufacturing due to the availability of cost-effective labor and its strategic location. The country became the world’s 12th largest economy in 2024, up from 15th in 2018.
The ambitious fiscal stimulus that was focused on sustainable transition and energy sovereignty, outlined in the Mexican government’s 2025-30 National Development Plan, was a boon for scrap-intensive industrial sectors.
Auto focus The Mexican Automotive Industry Association believes that Mexico will become the fifth-largest global vehicle producer by the end of 2025.
It is estimated that Mexico produced 4 million vehicles in 2024, up by 5.56% from the volume in 2023. The country is the fourth-largest global exporter of vehicles.
Mexico has attracted attention from Chinese-owned makers of electric vehicles (EVs) including BYD and MG Motor, with such producers seeking to gain advantage from trade agreements and Mexico’s proximity to the US market when choosing offshore manufacturing locations.
Announcements in the week ended April 25 from automakers Hyundai and GM – that they intend to retain a production presence in the region – and a degree of backtracking on the tariffs to be imposed on goods that comply with the USMCA trade agreement – between the US, Mexico and Canada – is a positive sign amid continuing global trade disputes.
While there has been uncertainty regarding fast-moving tariff impositions since April 2025, the USMCA-compliant nature of Mexican automotive exports to the US suggests that there will be no reduction in this interest.
Mexico is exempt from the 25% automotive tariffs under the USMCA, provided that the goods meet the USMCA rules of origin. This exemption helps to minimize the disruption to the automotive industry and supports the integrated supply chains between the three countries.
Technical implications boon for aluminium scrap Weight reduction in the production of new vehicles, hybrid vehicles and electric vehicles is facilitating demand for non-ferrous scrap and alloys, specifically aluminium.
As much as 90% of aluminium can be recycled, making it one of the most sustainable materials used in the automotive industry.
New vehicle models typically make more use of aluminium to reduce weight and improve fuel efficiency, which is a positive, with nearshoring investment in the Mexican automotive sector being an increasingly prevalent theme.
Automotive-grade aluminium alloys weigh around 2.7kg per litre of volume, compared with steel’s 7.8kg per litre, which significantly reduces vehicle weight. This weight reduction leads to better fuel economy and performance, so although aluminium is more expensive than steel, the overall cost can be offset by other savings.
The amount of secondary aluminium alloy ingot production in Mexico is substantial, with production in the range of 40,000-45,000 tonnes per month.
The combined requirement for aluminium extrusion and sheet metal for EVs worldwide is projected to be almost 10 million tonnes per year by 2030.
Aluminium scrap utilization in automotive High-quality scrap, such as clean wheels and cast aluminium, is used for critical components such as engine blocks and cylinder heads, where material integrity is essential.
Lower-quality scrap such as old sheet can be used for non-critical parts, or as a supplement in alloy production, reducing costs without compromising performance.
Aluminium alloys are used significantly in panels used to produce car chassis, which reduces weight.
Pricing obstacles Many Mexican domestic scrap market participants currently benchmark non-ferrous secondary pricing from London Metal Exchange and COMEX cash-settled aluminium and copper prices.
Recentspread volatility for exchange-traded copper and aluminium, and the persistent arbitrage between the LME and COMEX, is exacerbating pricing for market participants in the region.
This market volatility is due in large part to global tariff uncertainty, with China being the main target of US tariff policy at the moment.
Copper market participants continue to operate under exchange-based volatility and thecurrent US Section 232 investigationinto the national security implications of copper imports into the US. This was scheduled to be concluded in November.
Fastmarketshas launched a raft of physical price assessmentsto which Mexican domestic scrap market participants can contribute, and which can offset to a degree the reliance on exchange-based benchmarking for scrap pricing.
Non-reporting of a legal 16% VAT requirement has also led to price distortion for alloys and finished products. Because of this, our methodology has a strict requirement that VAT be included.
US Midwest A380 alloy price references are reported to be an increasingly unreliable benchmark for Mexican pricing, with sources said to be able to achieve at best 92-95% of that Midwest value in their local negotiations, making a domestic alternative necessary.