Alfonso Salazar

Alfonso Salazar questioned the expected impact on cash cost per pound (before by-product credits) if copper production falls by 5% in 2026. He also asked for the percentage of costs denominated in Mexican pesos and Peruvian soles for the respective mines, and requested an update on the company's long-term production guidance, noting that the website indicated a January update.

Answer

Raul Jacob, Vice President, Finance, Treasurer, and CFO, confirmed that a 5% reduction in copper production would likely increase production costs, but the company is implementing initiatives to control costs. He specified that 39% of costs are in Mexican pesos and 10% in Peruvian soles, with 51% in US dollars. Mr. Jacob provided updated long-term copper production forecasts: 911,400 tons for 2026, slightly above 900,000 tons for 2027, 970,000 tons for 2028 (including Tia Maria's full year), and 1,060,000 tons for both 2029 and 2030. He noted that lower ore grades at Toquepala (temporary) and Cuajone (considering expansion) are factors.

Alfonso Salazar asked if the projected 5% fall in copper production for 2026 would lead to a similar increase in cash cost per pound before by-product credits. He also requested a breakdown of costs in Mexican pesos and Peruvian soles for the respective mines to understand currency appreciation impacts. Additionally, he sought an update on the company's long-term production guidance, particularly for Buenavista and La Caridad mines beyond 2030.

Answer

Raul Jacob, VP of Finance, Treasurer, and CFO, confirmed that the reduction in copper production would impact production costs, but highlighted ongoing initiatives to control and reduce maintenance and contractor services. He specified that 39% of costs are in Mexican pesos, 10% in Peruvian soles, and 51% in US dollars. Mr. Jacob provided updated long-term production guidance: 911,400 tons for 2026, slightly above 900,000 tons for 2027, 970,000 tons for 2028 (including full year Tia Maria), and 1,060,000 tons for 2029 and 2030. He stated that actions, such as finding new reserves and considering capacity expansions, would be taken to address production trends at Buenavista and La Caridad beyond 2030.

Alfonso Salazar asked for an update on the water pipeline permit for the Buenavista mine and inquired about the cost impact of trucking water. He also asked for the percentage of operating costs at Mexican mines that are denominated in Mexican pesos.

Answer

Executive Raul Jacob reported that the company is still working to obtain the pipeline permit but is not currently trucking water, instead using other company-owned water sources. He specified that approximately 39% of the total costs at their Mexican operations are in Mexican pesos.

Alfonso Salazar of Scotiabank asked about the consistent difference between production and shipment volumes. He also inquired about potential challenges in securing tailing dam permits in Mexico and requested an update on the water pipeline for the Buenavista mine.

Answer

Executive Raul Jacob explained that the volume difference arises from reporting mined copper content versus sold refined copper. He confirmed there are no issues with tailing dam permits in Mexico and that the company is working to expand their capacity. He offered no new update on the Buenavista water pipeline, stating the situation is as previously reported.

Alfonso Salazar of Scotiabank sought to confirm if the stock dividend was a one-off event, asked for the number of shares remaining in treasury, and requested the company's multi-year copper production profile, including Tia Maria's contribution.

Answer

Executive Raul Jacob clarified that future dividend decisions are up to the Board each quarter. He stated that after the current dividend, approximately 103.4 million shares will remain in treasury. He then provided a production forecast, projecting 948,800 tons in 2024, rising to over 1 million tons by 2027, which includes production from the Tia Maria project.

Alfonso Salazar, Director and Equity Research Analyst at Scotiabank, asked about Ternium's demand outlook for Mexico in 2026, including the drivers for an anticipated recovery after a challenging 2025. He also sought a broader perspective on the North American steel market, specifically how the U.S. has been sourcing steel amidst current tariffs and the expected normalization of trade in the coming years.

Answer

Máximo Vedoya, Ternium's Chief Executive Officer, stated that Mexico's apparent steel consumption is projected to be down 10% in 2025, largely due to a significant decline in infrastructure spending. However, he expressed optimism for a recovery in 2026, driven by renewed infrastructure growth and stabilized U.S.-Mexico trade relations. For North America, Mr. Vedoya noted decreasing U.S. imports and expressed confidence that the USMCA agreement would be renegotiated to liberalize trade within the region, aligning with a shared vision for regional manufacturing industrialization. He acknowledged bottlenecks like labor and energy but highlighted Mexico's potential as a key partner in this regional strategy.

Alfonso Salazar inquired about the demand outlook for Mexico in 2026, including drivers for recovery, and provided a broader perspective on North America's trade situation, tariffs, and potential normalization of steel trade. He also followed up on potential bottlenecks for manufacturing reshoring, such as labor and energy.

Answer

Máximo Vedoya, Ternium's CEO, acknowledged a 10% decline in Mexico's apparent steel consumption in 2025 but expressed optimism for a 4% recovery in 2026, driven by infrastructure growth and trade stabilization. He noted decreasing U.S. imports and expressed confidence in the renegotiation of USMCA to liberalize trade within the region, aiming for a 'Fortress North America' concept. Mr. Vedoya emphasized Mexico's potential as a partner to address U.S. industrialization goals, acknowledging challenges like energy and labor.

Alfonso Salazar of Scotiabank questioned how the U.S. could balance its steel supply and demand without imports, asking about the potential ramifications for end-users and the global scrap market, and how scrap trade might evolve.

Answer

CEO Maximo Vedoya emphasized his strong belief in the USMCA, stating that its mutual benefits for enhancing regional competitiveness make a rational trade agreement the most likely outcome. He noted that Mexico's own industrial plans align with strengthening North American supply chains. Regarding scrap, he does not foresee major near-term changes, as adding new U.S. production capacity takes several years, though the long-term shift to electric arc furnaces will continue.

Alfonso Salazar asked for the outlook on the North American steel industry, questioning how the region will balance the need for new capacity with global overcapacity from China and the potential risk of intra-regional tariffs.

Answer

CEO Maximo Vedoya stated that the global market is shifting towards regional blocs as a reaction to China's state-supported overcapacity. He expressed confidence in North America's competitiveness, particularly in low-carbon steel, and downplayed the risk of intra-regional tariffs, viewing the political climate as an opportunity for collaboration to strengthen the regional supply chain and reduce dependence on Asia.

Alfonso Salazar of Scotiabank asked about long-term (5+ years) growth drivers for pulp demand, seeking to understand opportunities beyond China given potential stagnation and global trade risks.

Answer

Executive Leonardo Grimaldi expressed a constructive long-term view, highlighting several growth drivers. These include rising tissue demand in developing markets like Southeast Asia, the growth of specialty papers, and the significant trend of fiber substitution, where hardwood pulp is gaining market share from softwood at an accelerated pace.