US, Mexico officials to meet on Mexican cement tariff

US, Mexico officials to meet on Mexican cement tariff
Published: 23 September 2005

Trade negotiators from Mexico and the U.S. will meet Friday in Mexico City to discuss lifting tariffs on Mexican cement in the U.S. as hurricane damage threatens to make tight supplies of building materials there even tighter. 
 
The recent havoc wreaked along the Gulf Coast by Hurricane Katrina alone is expected to boost U.S. demand for cement by more than one per cent for several consecutive years, while a massive Hurricane Rita could destroy more property as it bears down on Texas and western Louisiana. Ophelia also caused its fair share of damage along the Atlantic Coast this month. 
 
An elimination of the tariffs would significantly benefit Monterrey, Mexico-based Cemex SA (CX), the world’s third-largest cement maker, analyst and industry experts agree. 
 
Cemex’s American Depositary Receipts have surged 17 per cent since Katrina hit ground in late-August, as investors wagered that the company stands to benefit from reconstruction efforts in areas hit by the storm. Cemex ADRs closed at US$51.83 Thursday. 
 
Carlos Hermosillo, an analyst with Vector Casa de Bolsa in Mexico City, said that without the tariffs in place, the company stands to gain around U$300 million a year in revenue. 
 
"It’s not that Mexican cement would suddenly flood the U.S. market," Hermosillo said. "But Cemex would take advantage of the idle capacity that it has here." 
 
Hermosillo estimated that Cemex’s production capacity in Mexico has room to grow by 15 per cent to 20 per cent, or 3Mt of cement, a year. Even so, he added, lower tariffs would have a modest impact on the company, as Cemex expects to have global sales of around US$16bn this year. 
 
Currently, Cemex pays a 54.97 per cent duty to export to the U.S., while other Mexican cement companies pay 61.85 per cent High volume exporters have always received separate rates, said Meredith Williams, a Department of Commerce spokeswoman. The tariffs have been in place since 1990.