The tax system in Mexico poses significant challenges for the collection of metal scrap, particularly impacting the informal market where domestic or street scrap is prevalent. This situation has led mini steel mills, such as DeAcero, to rely heavily on importing scrap metal, specifically from California. Juan Antonio Reboulen, a spokesperson for DeAcero, highlighted the urgency of this issue in an interview with the Mexican newspaper El Norte. He explained that their electric arc furnaces must remain operational, necessitating the continuous melting and importing of scrap when local collection efforts fall short.
One of the primary obstacles to effective scrap collection in Mexico is the lack of an appropriate tax scheme to incentivize the activity. Reboulen pointed out that the informal collectors, often referred to as peddlers, struggle to register with the Treasury and fulfill tax obligations similar to those required by the American Internal Revenue Service. The complexities of the tax law create barriers that prevent these collectors from participating in the formal market, ultimately limiting the available supply of scrap metal for domestic use.
Industry experts have noted that DeAcero is the largest scrap company in Mexico, boasting over 20 collection yards. Following DeAcero, the second largest scrap entity is the American Steel Dynamics' subsidiary, Omnisource. The third largest, Dimeca, formerly known as Distribuidora de Metales y Cartones, operates independently of any steel manufacturer, establishing itself as the largest independent scrap company in the country. Despite these players, the overall scrap metal supply remains insufficient to meet the industry's demands.
A notable observation from scrap market experts is the impact of informal collection on DeAcero's operations. While industrial collection accounts for around 65% of the total scrap input, only a third is sourced from informal peddlers. This reliance on industrial sources highlights the inefficiencies in the current system and the missed opportunities for enhancing local scrap collection efforts.
