Mexico plans to bring back a North American steel committee to strengthen trade with the United States. This proposal aims to improve trade relations between the two countries. According to Bloomberg, this initiative will focus on boosting economic cooperation. It is viewed as a move to protect shared trade interests in the steel industry. With Mexico looking to revive the North American steel committee, we might see less price volatility for steel in the long run. Mexico has become a major steel supplier to the U.S., with imports surpassing 4.2 million metric tons in 2024. Better relations could lead to more stability in the market. This may indicate that any extra risk in steel futures could gradually decrease in the coming months. However, the negotiation process could bring some short-term fluctuations in the market. Traders might want to consider options strategies that take advantage of this uncertainty, like straddles on key companies such as Cleveland-Cliffs (CLF) or Nucor (NUE). These strategies could be profitable if news leads to sharp price changes. As the first committee meetings approach, implied volatility for these stocks is likely to rise. We can look back at the period from 2018 to 2020 when discussions about Section 232 tariffs led to major price swings in steel equities as a reference for what might happen. While the aim of the new committee is collaboration, even a hint of disagreement could unsettle the market. Thus, we can see this news as a positive sign for long-term stability, while also acting as a short-term trigger for volatility. This renewed attention to trade rules will impact the VanEck Steel ETF (SLX) directly, making its options useful for reflecting overall market sentiment. Keep an eye on Hot-Rolled Coil (HRC) futures, as they are the primary benchmark and will respond first to news from the committee. If prices stay above the $750/ton range, like we experienced earlier this year, there could be a risk if the committee suggests a significant increase in cross-border supply. From Mexico’s perspective, this is a good sign for producers like Ternium (TX). Any progress in talks could positively influence the company’s outlook. We may see bullish positions develop in its derivatives due to improved access to the U.S. market.

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