Please ensure Javascript is enabled for purposes of website accessibility

Nucor Takes Advantage of USMCA, Opens Steel Facility in Mexico

By Rich Smith - Mar 5, 2020 at 12:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

After an initial trial period, production will ramp towards 400,000 tons annually.

Years in the making, the United States-Mexico-Canada Agreement on free trade (USMCA) is finally about to pay off for one U.S. company: Nucor (NUE 3.56%), one of the world's largest steelmakers.

Signed into law by President Trump on November 30, 2018, USMCA encourages production of automobiles (among other things) in North America. It does this by instituting zero import tariffs on goods produced in Mexico, Canada, or the U.S., and exported to one of those three countries, provided that 62.5% (rising to 75% over time) of the automobile's "content" is certified manufactured in North America. In particular, 70% of a car's steel and aluminum must originate in North America.  

That is why Nucor wants to do more business in the North American nation where labor is cheapest: Mexico.

Hot-rolled steel coil

Image source: Getty Images.

A little over a year ago -- right before USMCA entered into force -- Nucor formed a joint venture with Japan's JFE Steel to build a $270 million steel plant in Silao, Guanajuato, in central Mexico, capable of producing 400,000 tons of hot-dip galvanized steel sheet annually.  

Production was supposed to have begun late last year but has been delayed. This morning, however, Nucor announced that "Nucor-JFE Steel Mexico, S. de R.L. de C.V." is finally up and running after beginning its "trial production" period.  

In a statement, Nucor explained that "Nucor-JFE is well-positioned to serve the large number of automakers who have built facilities in central Mexico," where "automotive production ... is expected to continue to grow and the new United States-Mexico-Canada Agreement (USMCA) increases the amount of North American content required in cars and trucks to avoid tariffs imposed by the United States."

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Nucor Corporation Stock Quote
Nucor Corporation
$109.68 (3.56%) $3.77

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.