Mexico and the US plan to ratify on March 6 an agreement to end a long-standing trade dispute over cement, a spokesman for Mexico’s Economy Ministry said Wednesday.  Economy Minister Sergio Garcia de Alba will travel to Washington to sign the agreement, which was reached in January after years of talks between the countries to end the 15-year-old duties. 
 
Under the agreement, Mexican companies will be able to ship up to 3Mt of cement a year to the US for three years, with the duties reduced to US$3/tonne from the current US$26.28/tonne. Quotas will be allocated on a regional basis and will gradually increase in the second and third years, after which time duties will be lifted altogether.  The main beneficiaries of the agreement are Mexican cement companies, such as Cemex and Grupo Cementos de Chihuahua SA (GCC) although some would argue that the US industry also comes out of this rather well.
 
Cemex plans to boost its exports to the US from Mexico to 2Mt in 2006, about 700,000t more than in 2005.  In addition, the company expects to receive about US$100m in cash from unliquidated historical duties associated with the antidumping order going back to 1990, as well as the elimination of about US$65m in liabilities. 
 
GCC’s quota for the next three years will be above 700,000t, but the company expects to keep its exports to the US stable around 600,000t this year due to production capacity limitations and demand in Mexico. GCC anticipates that it will receive a US$40m refund and will eliminate US$30m in liabilities from its balance sheet due to the agreement. 

Reading between the lines, Mexico, which will have exported very close to 3Mt last year, effectively gets no new market share, but will have a US$100m capital injection.  In return for the possible opening of US markets, Mexico is expected to open its cement markets which could see the re-entry of ships such as the Mary Nour exploiting this new freedom to sell cement into Mexico. If this cement was eventually to be produced in the US and exported to Mexico it would add an ironic twist to this on-going debate.

Perhaps the US Southern Tier Cement Committee (STCC) might come out of this better than was first feared. Mexico will continue to be constrained in the level of cement exports to the US. If exports rise above this then the old deal is back on the cards. Lorenzo Zambrano has a very useful cash injection but little further clout in the US, and in the meantime the US press is off the industry’s backside in terms of cement shortages and higher prices. Will Cemex open its doors to cement imports in return for marginally higher level of sales into the US? We do not think so and as such, legal council for the STCC, lead by Joe Dorn of King & Spalding LLP, may well have scored a decisive strike, once all the (cement) dust has finally settled.