Mexico City Construction- On the Comeback Trail

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There’s no denying that there was a serious slowdown in the construction industry in Mexico City around 2012 and 2013. General economic lethargy had a huge impact on construction, as both commercial and residential consumers worried about their financial futures. The end result was a Mexico City construction industry that contracted for 9 straight months in 2013 with an overall loss of 4.5%.

As it turns out, it truly was the darkest before the dawn, as 2014 saw steady growth and the 4th quarter of last year saw Mexico’s economy grow at its largest rate in two years. The GDP climbed 2.6% from 2013 to 2014, and most experts are predicting a breakout construction year in 2015.

Comeback Trail

A simple indicator of this positive outlook is the breaking ground on two large-scale projects in 2015, a rail-link connecting to ports in Texas, and a $9.17 billion international airport which is set to open in 2018. Both builds are expected to be beneficial to the steel industry, especially a rail-link that could make transport of goods even more efficient.

Construction, manufacturing, and services are expected to carry the potential economic growth going forward in 2015 due to dismal performances by mining and the unpredictability of oil. That being said, the main goal for construction is sustainability, especially after easing labor laws aimed at building the construction workforce. Recent budget cuts have lowered expectations on that sustainability with growth forecasts being trimmed from 4.4% to 3.5%, but a strong second half could raise optimism heading into 2016.

Since much of Mexico City’s economic recovery is based on the strengthening of the U.S dollar many of the construction outlooks are very similar. Multi-family housing starts continue to shine in the residential sector as office construction leads the commercial building industry.

Cold roll steel pricing stabilization in 2014 and increased production volumes starting off 2015 have set predictions for the highest demand for steel in construction projects in eight years. If Mexico City’s growth sees more call centers, warehouses, and apartments, that demand (especially for heavier grade material) will stay steady.

While the growth and steel demand for the second half of 2015 may not be explosive, it should be steady which manufacturers and contractors need to view as a good sign. With the demise the industry and Mexico City in particular saw in 2012, 2013, and into part of 2014, coming out of the rubble will be a marathon, not a sprint.

Learn more about steel material in construction at Continental Steel.

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