Electric furnaces produced 85.4% of Mexico's crude steel in 2022, against 14.6% from oxygen converters, on the World Steel Association's figures in World Steel in Figures 2023. That makes Mexican steel look like an electricity problem. It is only half of one.
Take the numbers stage by stage. Lawrence Berkeley National Laboratory's 2010 ENERGY STAR guide for the U.S. iron and steel industry puts electric arc furnace electricity at 304 to 525 kWh per short ton of product, with an average of 401. The figures below are on that same US short ton basis. It puts reheating furnace fuel at 0.7 to 1.4 million Btu per ton, an average of 1.1, which is about 320 kWh of fuel energy per ton. Hot strip mill electricity adds 90 to 152 kWh per ton. A renewable power contract reaches the first line and the third. It does nothing at all to the second.
That is the split a Mexican steel producer has to plan around. The fuel side and the electricity side are bought from different counterparties, on different timetables, under different regulators. Treating them as one program is how a mill ends up with a clean power contract, an unchanged gas bill and an emissions figure that barely moves.
What Mexican steelmaking actually looks like
The World Steel Association put Mexico's crude steel production at 18.1 million tonnes in 2022 in World Steel in Figures 2023. Its production release of 25 January 2024 restates 2022 at 18.4 million tonnes and gives an estimated 16.3 million tonnes for 2023. The process mix matters more than the tonnage. An electric furnace melts scrap and direct reduced iron using electricity and chemical energy. Everything downstream of the caster, the reheat furnace, the ladle heaters and the annealing lines, is fired on natural gas.
So the plant has two separate cost bases. Electricity is bought from a supplier or at a node, billed monthly, exposed to demand charges and capacity obligations. Gas comes on a pipeline contract with its own index and transport cost. A hedge on one is not a hedge on the other.
What a renewable contract reaches, and what it does not
A steel mill clears the qualified user threshold without difficulty. The Ley de la Industria Eléctrica, published in the Diario Oficial de la Federación on 11 August 2014, sets the qualifying level at 1 MW of demand at a centro de carga after the transitional years. Article 48 leaves qualified supply to freely negotiated terms. A mill can therefore contract its electricity rather than take the CFE basic supply tariff, and can source it from renewable generation if it chooses.
What that contract covers is the melt shop, the mill motors, the auxiliaries and the compressed air. On the LBNL ranges above, that is the larger of the two electricity lines plus the smaller one. It is real money, and the structure of the deal decides how much of it is fixed. Producers weighing this should read how corporate PPAs are structured in Mexico before treating a headline price as the delivered price.
What it does not cover is any of the fired equipment. No power contract changes the reheat furnace, and the reheat furnace is where the fuel goes. The onsite option has the same limit. Rooftop or ground-mounted solar behind the meter displaces purchased kilowatt hours and leaves the burners untouched, which is worth remembering when comparing the choice between onsite and offsite generation.
The fuel side pays first
The width of the LBNL range is the argument. Reheating furnace fuel runs from 0.7 to 1.4 million Btu per ton. The gap between a well-run furnace and a poorly run one is up to 0.7 million Btu per ton of rolled product. On our arithmetic, a mill rolling one million tons a year sits somewhere inside a 700,000 million Btu spread that is decided by burner type, insulation, combustion control and charging practice, not by its power supplier.
The measures that close that gap are listed in the same LBNL guide for hot rolling. Recuperative or regenerative burners in place of cold air burners. Furnace insulation. Control of flue oxygen with variable speed drives on the combustion air fans. Correct reheating temperature rather than a standing setpoint. Hot charging where the caster and the mill can be sequenced. None of it is new technology and none of it waits on a regulatory change.
Waste heat is the second fuel-side item, and it is worth being precise about what a steel plant actually has to recover. The recoverable streams are electric arc furnace offgas and reheat furnace flue gas. They are hot, continuous and already ducted. A mill does not generate an organic waste stream, so biomass conversion is not the route. Offgas heat recovery is. Anyone building the case should start with the plant's own measurement, which is what energy efficiency for industrial growth in Mexico sets out.
Código de Red is a steel problem specifically
The Comisión Reguladora de Energía issued the Código de Red as RES/151/2016, published in the DOF on 8 April 2016, and reissued it as RES/550/2021, published in the DOF on 31 December 2021 and in force since 1 January 2022. It applies to load centers connected at media tensión, above 1 kV and up to 35 kV, and at alta tensión, 35 kV and above, whatever the contracted demand or supply scheme. Steel mills sit in the alta tensión group, and that group carries three requirements the media tensión group does not: power factor, current harmonic distortion and voltage flicker.
An electric arc furnace is the textbook source of all three. The arc is unstable by design, the load swings hard within the melt cycle, and the disturbance travels out into the network. Compliance studies have to use Class A measurement instruments under NMX-J-610/4-3-ANCE or IEC 61000-4-30. Load centers connected before 8 April 2016 had until 9 April 2019 to comply, and a work plan signed by the legal representative was required before that date where the site was not yet compliant.
CRE holds the compliance and sanction authority here, not CENACE, and it does not authorize or certify inspectors for these studies. The plant may run them itself or engage a specialized firm. For a mill that has never measured flicker at the point of common coupling, that measurement is the cheapest item on this list and the one whose deadline is already behind it.
What CBAM changed on 1 October 2023
Regulation (EU) 2023/956 of 10 May 2023, published in the Official Journal on 16 May 2023, established the European carbon border adjustment mechanism. Iron and steel is one of the covered goods, alongside cement, aluminum, fertilizers, electricity and hydrogen. Commission Implementing Regulation (EU) 2023/1773 of 17 August 2023, published on 15 September 2023, set the reporting rules for the transitional period, which opened on 1 October 2023.
During that period EU importers report the embedded emissions of what they bring in. They cannot produce those numbers without the producing mill, so a Mexican exporter to the EU is already the data source whether or not it has decided anything about capex. Direct emissions from fired equipment and indirect emissions from purchased electricity are reported separately. The split this article argues for internally is the same split the reporting asks for.
What to do first
Meter before you commit. Establish electricity per tonne and fuel per tonne by stage, over at least twelve months, with the melt shop, the reheat furnace and the mill separated. Most plants have the electricity data and are estimating the gas side from a single utility meter, which is not enough to rank retrofits.
Then take the fuel side first, because it is the line no procurement decision will touch and because the retrofits do not depend on a counterparty. Run electricity procurement as a separate track with its own timetable, and price the contract on delivered cost rather than on the energy component alone. Keep the two ledgers apart when reporting results. A saving measured in million Btu is not a saving in kilowatt hours, and restating one as the other is the fastest way to lose a board's confidence in the whole program.
Find out which half of your energy bill is worth attacking first
Mexico Energy Partners separates the plant's electricity and fuel consumption per tonne and identifies which furnaces and which stages carry the load. The output names the retrofits worth costing and says which of them belong ahead of any renewable procurement decision. You supply twelve months of CFE invoices, twelve months of gas invoices, monthly production tonnage, and the furnace list with rated capacity and burner type.
Use the form below to request an energy split assessment for your mill, or reach the team through the Mexico Energy Partners contact page or on 55 8652 8023. Mexico Energy Partners sells no equipment and is compensated only by the client.
Sources
- World Steel Association, World Steel in Figures 2023, 2023. Mexico crude steel production by process, 2022.
- World Steel Association, December 2023 crude steel production and 2023 global totals, 25 January 2024. Mexico crude steel production, 2023.
- E. Worrell, P. Blinde, M. Neelis, E. Blomen and E. Masanet, Energy Efficiency Improvement and Cost Saving Opportunities for the U.S. Iron and Steel Industry, Lawrence Berkeley National Laboratory ENERGY STAR guide, October 2010. Energy use by process and hot rolling measures.
- Ley de la Industria Eléctrica, Diario Oficial de la Federación, 11 August 2014, Article 48 and the transitional demand thresholds.
- Comisión Reguladora de Energía, RES/151/2016, Código de Red, DOF, 8 April 2016, and RES/550/2021, Código de Red, DOF, 31 December 2021, with CRE's guide to the technical requirements applicable to Centros de Carga.
- Regulation (EU) 2023/956 of 10 May 2023 establishing a carbon border adjustment mechanism, Official Journal, 16 May 2023.
- Commission Implementing Regulation (EU) 2023/1773 of 17 August 2023 on reporting obligations during the CBAM transitional period, Official Journal, 15 September 2023.