KMC acquires NMM in ‘higher value-added play’

Klöckner & Co acquired National Material of Mexico (NMM), a service center and materials supplier serving automotive end markets in North America, on August 1, a move Ganem described as a “higher value-added play.”

 

“They [NMM] are a big participant in the automotive sector, which requires a high level of technical expertise and quality. [NMM has] more of a service center model, as opposed to a purely distribution [model] where you’re not adding much value, you’re just buying and selling, as opposed to servicing in managing complex supply chains,” Ganem told Fastmarkets.

 

The acquisition allows KMC to enter the electrical steel market, a key component of the engines in EVs and transformers, according to the company said.

 

“In addition to that service center component, specific to the automotive sector, there’s a lot of high value-added manufacturing associated with this, specific to the electrical steel business model that NMM has in which they’re actually manufacturing cores that are used in transformers,” Ganem said.

 

Another factor that led to the acquisition was NMM’s geographical presence in North America, the CEO said.

 

“The great thing about National Materials is that their business is in Mexico, the US and Canada, so they have a full North American solution that we can be part of. It’s a platform for growth where we make further investments and, based on how the market develops and how the mills develop, we’ll position ourselves accordingly as one of the leaders in that product line and help build those supply chains for OEMs, which are going to have increasing demand for those products,” Ganem said.

 

Collectively, KMC and NMM will have a presence in the US and Mexico spanning 56 sites. Ganem added: "In Mexico, we’ve seen just tremendous investments…a lot of demand coming from the EV side. Now being a major supplier in the automotive sector, we’re able to contribute and be a key supply chain partner to help drive the electrification of the North American marketplace."

 

Rise of reshoring to boost North American manufacturing

The insufficient number of domestic producers of electrical steel has diverted the production of the material to Mexico, which has been a “big beneficiary in the electrical steel marketplace,” Ganem said.

 

Ganem also highlighted the rise of reshoring in the US and Mexico, which will boost manufacturing in North America.

 

“There’s reshoring, we see a lot of this, where production is being shifted from Asia, typically back to Mexico and to the US, depending on the type of product or manufacturing. We’re seeing a lot of European companies looking to relocate to Mexico because they see the opportunity,” Ganem said.

 

He added: “Every one of our larger OEM customers have a strategy to be in Mexico, to shift production from other parts of the world back to North America. It’s happening every single day. There’s no question that manufacturing in North America is going to grow because of it.”

 

“To be a key supplier, you’re going to have to have production capabilities closer to the end-use markets,” Ganem said.