FORM 6 - K



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934


As of 7/12/2023



Ternium S.A.
(Translation of Registrant’s name into English)


Ternium S.A.
26, Boulevard Royal - 4th floor
L-2449 Luxembourg
(352) 2668-3152
(Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or 40-F.

Form 20-F a Form 40-F __

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12G3-2(b) under the Securities Exchange Act of 1934.

Yes __ No a


If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
Not applicable



The attached material is being furnished to the Securities and Exchange Commission pursuant to Rule 13a-16 and Form 6-K under the Securities Exchange Act of 1934, as amended.

This report contains Ternium S.A.’s Sustainability Report 2022.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


TERNIUM S.A.
        





By: /s/ Guillermo Etchepareborda        By: /s/ Sebastián Martí
Name: Guillermo Etchepareborda        Name: Sebastián Martí
Title: Attorney in Fact                Title: Attorney in Fact
    


Dated: July 12, 2023




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CONTENTS

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16. Ternium at a Glance
18. Delivering Our Business Strategy
30. Leading the Development of the Mexican Steel Industry
32. Economic & Financial Performance
14
CHAIRMAN’S LETTERTHE COMPANY

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OUR SUSTAINABILITY JOURNEY
12. Ternium’s Approach to Climate Change

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36130
ESG: ENVIRONMENTAL_SOCIAL_GOVERNANCEANNEXES
38. Addressing Climate Challenges: Strategies for a Sustainable Future
52. Minimizing Our Environmental Footprint
64. Improving Our Safety Performance
80. Realizing Our People’s Full Potential
92. Helping Our Communities Thrive
108. Strengthening Our Value Chain
118. Commitment to Integrity
132. Annex 1:
GRI, SASB & TCFD Indexes
139. Annex 2:
UN Sustainable Development Goals
143. Annex 3:
Historical Data
Ternium S.A. (the “Company”) is a Luxembourg company
and its American Depositary Shares, or ADSs, are listed
on the New York Stock Exchange (NYSE: TX). We refer
to Ternium S.A. and its consolidated subsidiaries as
“we,” “our” or “Ternium.”
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The financial and operational information contained in this report is based on Ternium’s operational data and on the Company’s consolidated financial statements, which were prepared in accordance with IFRS and IFRIC interpretations as issued by the IASB and adopted by the European Union and presented in U.S. dollars ($) and metric tons.


4. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
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CHAIRMAN’S
LETTER
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THE COMPANYENVIRONMENTAL
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Following an exceptional 2021, 2022 was another good year for Ternium as it navigated a highly volatile geopolitical and economic landscape in our region and at a global level. The war in Ukraine, rising inflationary pressures, the gradual slowdown in the global economy, as well as the economic instability in Argentina, created a challenging environment for our company.

In spite of these challenges, Ternium posted solid financial results for the year, with an EBITDA of $3.4 billion and net income of $2.1 billion on shipments of 11.9 million tons. Net sales were similar to those of 2021 despite slightly lower shipments, reflecting the benefits of integrating slab production in Brazil with finished production in Mexico. Free cash flow was particularly encouraging at $2.2 billion and we accumulated a net cash position of $2.6 billion by the end of the year. A dividend of $2.70 per ADS was approved for the year.

Despite the ongoing global uncertainty, we are moving forward with our agenda of growth and sustainability. Ternium, with its solid financial and unique industrial and commercial footprint, is well positioned to grow as a supplier of high quality steel products for the industrial sector throughout the Americas and to support nearshoring and industrial development opportunities.

Earlier this year, we announced significant investments which will continue to transform Ternium in the years ahead. Over the next three years, we will invest $2.2 billion in electric arc furnace (EAF) steelmaking and direct reduction of iron ore (DRI) facilities with a capacity of 2.6 million tons per year of steel slabs and 2.1 million tons per year of DRI. This investment will complete the integration of our flat-rolled steel production operations at Pesquería, Mexico, and will complement the ongoing expansion of our high value added production capacity in cold rolling, galvanizing and additional advanced finishing lines, including the expansion of our R&D center.

The investment in Pesquería is aimed at (i) strengthening our capabilities to supply Mexico’s industrial sector with its opportunities for growth due to the nearshoring of industrial supply chains, (ii) meeting “melted and poured” requirements under the USMCA trade agreement, and (iii) advancing towards our 2030 decarbonization target.

Ternium is already a steel producer with a relatively low level of CO2 emissions intensity, and is fully committed to further advance towards the decarbonization of its operations and to reducing their environmental footprint. Renewable energy is an important element in our decarbonization strategy and we are targeting to source 40% of our purchased electricity requirements from renewable energy as part of our 2030 decarbonization target. This year we will be investing $160 million in a wind farm in Argentina, which will supply 65% of our requirements


6. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY






for purchased electricity in the country. We expect the wind farm to begin operations in the second half of 2024.

This month, we increased our investment in Usiminas by acquiring part of the participation held by Nippon Steel Corporation in the Usiminas controlling group. As a result of this transaction, we now hold 51.5% of Usiminas’ control group, which holds the majority of the company’s voting rights, with the right to nominate the CEO and a majority of the Board of Directors, and 25.1% of the total shares. With our increased involvement in the company’s management, we aim to increase Usiminas’ competitiveness and strengthen its position in the Brazilian flat steel market.

Combining our strong regional presence in the Americas, and our downstream capabilities for producing the most value-added products, we are in a unique position for supplying the needs of the manufacturing, construction, and energy sectors in a region that should play a key role in the repositioning of the global supply chain in the coming years.

Although our performance in safety has been recognized by worldsteel and most of our safety indicators have improved, with our lost time injury frequency rate falling to its lowest ever level, we deeply regret that three fatalities occurred in our operations over the past 12 months. These events have led us to question deeply all our procedures, actions and training activities to ensure that safety is prioritized above all else throughout our operations, that our people have the training and tools to proactively reduce risks and prevent hazards, and that everyone is encouraged to identify opportunities for improvement.

We are increasing our investment in education programs for the communities around our plants with the decision to build a Roberto Rocca Technical School in the community of Santa Cruz, Rio de Janeiro, where we have our Brazilian slab-making facility. The new school will complement the existing Roberto Rocca Technical Schools in Pesquería, Mexico and in Campana, Argentina. By establishing beacons of excellence and leveraging network effects, we are contributing to improve standards in technical schools widely across our communities as well as encouraging local students to fulfil their potential independently of their means.

In this report, you can learn more about how Ternium embeds sustainability principles in all aspects of its management. This stems from the long-term vision of our founding shareholders and a resolute focus on strengthening the positioning and competitiveness of our operations.





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The guiding elements that shape the vision include the quality of our products and services, the relation with our local communities for which health, safety and respect for the environment are critical, the resilience and competitiveness of our value chain, and the central role of our people in our success.

Our employees are at the center of our efforts and achievements. I would like to give a special thanks to them for their ongoing efforts and achievements over the past year. I would also like to thank our customers, suppliers and shareholders for their continued support.



July 12, 2023








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Paolo Rocca
Chairman


8. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
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OUR SUSTAINABILITY JOURNEY
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THE COMPANYENVIRONMENTAL
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The concept of sustainability has been an integral part of our strategy for many years. At its core, it encompasses the principles of technical and operational excellence, as well as the preservation of people's safety. Safety is our primary value and extends to all those who perform roles within our facilities. To achieve these objectives, Ternium relies on the talent of its employees, and our efforts are focused on developing that potential, which is diverse and rich due to the multicultural nature of the countries in which we operate and are at the origins of our company.

We are thrilled to embark on a new phase of development with the Pesquería Industrial Center project at its base, representing the convergence of our vision for the future of the industry. The new DRI-EAF steel shop will be equipped with the latest technologies to accelerate Ternium's ongoing commitment to decarbonize its operations, including carbon capture capabilities and readiness to switch from natural gas to hydrogen for DRI production. In addition, all water utilized in the new facility’s production process will be sourced from wastewater treated for industrial use.

Our growth must be in harmony with the development of our communities, and education plays a key role in this aspect. In line with this commitment, we are strengthening our educational programs by building a new technical school in Santa Cruz, Brazil, and enhancing our existing programs to create more opportunities for all.

MÁXIMO VEDOYA
CEO

10. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
Ternium is a flat and long steel producer with a strong presence in the Americas. Ternium’s facilities are located in Mexico, Brazil, Argentina, Colombia, southern United States, and Central America. Additionally, the company is taking management responsibility over Usiminas, a leading flat steel manufacturing company in the Brazilian market, by increasing its participation in the company's controlling group.

Ternium has grown along a strategy mainly based on organic investments and acquisitions, consolidating its regional markets by seeking import substitution and expanding its commercial presence. As growth accelerated, Ternium broadened its product offerings and developed more sophisticated products to meet increasingly demanding markets, including the need for high-strength and ultra-lightweight steel for the automotive industry.

At the heart of our current growth strategy is our Industrial Center in Pesquería, Mexico. Built from the ground up and fully based on a sustainability philosophy, the Pesquería Industrial Center combines the latest technological developments to achieve efficient, high-quality production with a strong focus on people's safety along with an environmentally conscious approach.

The recently announced upstream capacity project will enable the company to better meet industry needs and
will be equipped with CO2 capture modules as well as the possibility of using green hydrogen when market conditions permit, allowing Ternium to further advance its decarbonization roadmap.

On this topic, in 2021, we set a medium-term goal to reduce our emissions intensity by 20% by 2030 compared to the 2018 baseline (scopes 1 and 2) along with a clearly defined roadmap based on six fundamental axes: energy efficiency; the use of renewable energies; the development of new raw materials in collaboration with business partners to replace coal and traditional iron ore pellets; the use of low-emission technologies; the expansion of CO2 capture and utilization capacity in existing plants, along with an increase in the use of scrap in the metal mix. We are also exploring other initiatives as part of our ambition to achieve carbon neutrality.


It is to be noted that all these initiatives have been feasible mainly thanks to the diverse talent we have fostered in our company over the years. Ternium is committed to developing its human capital, retaining talent, and ensuring equity among those who work within the company.

Sustainability is not a new topic for Ternium. ProPymes, the company’s support program for small and medium-sized suppliers and customers, has been in place for over 20 years. This program reflects our interest in growing together with our business partners and creating a resilient value chain even in times of adversity, such as the 2001 crisis in Argentina, when this program was created. Additionally, we continue to advance in our community growth programs, primarily focusing on education as a driver of change and social mobility.

Ternium reports to international agencies about its management approach and performance metrics on different Environmental, Social, and Governance (ESG) issues. In 2022, Ecovadis, a provider of business sustainability ratings, ranked Ternium within the 90th percentile in the "Manufacture of basic iron and steel" industry based on our policies, procedures, and actions related to environmental and labor practices, sustainable procurement and ethics. We also report to the Carbon Disclosure Project (CDP), an international non-profit organization that runs a global environmental disclosure system, on specific climate-change-related issues. In 2022, CDP rated Ternium with an A- in its Climate Change questionnaire thus including the company in the leadership category. This includes demonstrating adherence to best practices for strategy and action outlined in frameworks like the TCFD (Task Force on Climate-related Financial Disclosures).

Ternium has been acknowledged as a Sustainability Champion by the World Steel Association for five consecutive years and was recognized with the Steelie Award 2022 in the "Excellence in Education and Training" category. These relevant acknowledgments validate the company's commitment to sustainable growth and continuous improvement.





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Pesquería Industrial Center in Mexico: At the forefront of the industry while maintaining an environmental focus
SUSTAINABILITY REPORTING

This report provides a comprehensive description
of Ternium’s integrated strategy, including the progress made during 2022 in various economic, environmental, social, and governance aspects.
It also highlights how company actions are contributing in achieving the Sustainable Development Goals defined by the UN in 2015.

The content of this sustainability report reflects the material topics established in 2019 after conducting a materiality assessment as well as the annual updates arising from interactions with our stakeholders.


It is prepared in reference to the international standards set by GRI (Global Reporting Initiative) and SASB (Sustainability Accounting Standards Board), the guidelines of the worldsteel association, and follows the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures) regarding climate change reporting.


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In 2022, worldsteel distinguished Ternium under its Climate Action Recognition Program for the company’s support and contributions to worldsteel’s initiatives to reduce carbon dioxide emissions.

12. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
TERNIUM’S APPROACH TO CLIMATE CHANGE

OUR GOAL
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The company is committed to achieve a 20% reduction in emission intensity rates (scopes 1 and 2) from its steelmaking sites by 2030, compared to a 2018 baseline.
Plans for 20% Emission Intensity Reduction by 2030
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PROJECTS EXECUTED
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PROJECTS UNDER DEVELOPMENT
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PROJECTS UNDER ANALYSIS
INITIATIVESMEXICOBRAZILARGENTINAPROGRESS DURING 2022
_Guerrero facility in Mexico certified under ISO 50001
_Blast furnace expert control system incorporated at Brazil’s facility (IA technology)
_Increase of pulverized coal injection (PCI) in Brazil
_Equipment changes aimed at enhancing the energy efficiency of the production system
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Energy efficiency projects
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Scrap in the
metallic mix
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_Increase of the scrapyard capacity in Brazil
  The company recycled an aggregate of 2.8 million tons of scrap in 2022
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Alternative raw materials-biomass
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_Tryouts for mineral coal substitutes at an industrial scale with focus on biocarbon
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Renewable
energy
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_Recently announced wind-farm project in Argentina and execution of smaller onsite projects
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Carbon Capture
and Usage (CCU)
_First phase of CCU expansion in Mexico completed in 2021. Ongoing studies to increase CCU in Mexico and plans to build a pilot plant in Brazil
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Low carbon technology
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_Announced EAF Project in Mexico based on DRI-EAF Technology
FRAMEWORK
Governance
Board surveillance
Ternium’s Vice-Chairman appointed in 2021 to oversee decarbonization roadmap progress.

Decarbonization committee
Quarterly meetings with the CEO to review performance, projects and worldwide developments.
Strategy
Scenario analysis and an internal carbon price for project evaluations. Price determined at $80/ton of CO2.
Risks
Reviewed quarterly by Critical Risks Committee. Physical risk vulnerability analysis conducted by 3rd party (2021-2022)
Metrics
GHG emissions Verified by a 3rd party under GHG Protocol and worldsteel’s methodology.


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HIGHLIGHTS OF THE COMPANY’S LATEST MEDIUM-TERM INITIATIVES


LOW-CARBON TECHNOLOGIES
FOR A SUSTAINABLE FUTURE
New slab production capacity using the DRI-EAF
route. The direct reduction module will
include carbon capture capabilities and will
be ready to switch from natural gas to green
hydrogen whenever feasible.


FIRST WINDMILL FARM: TRANSFORMING
TERNIUM'S RENEWABLES LANDSCAPE
Ternium will invest $160 million in
a wind farm from which it will source electricity
in Argentina. The wind farm is expected to
reduce CO2 emissions by 92,500 tons per year
and have a power capacity of 72 MW.
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About the projectAbout the project
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LOCATIONCAPACITYLOCATION
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WIND TURBINES
Pesquería, Nuevo León, Mexico
DRI module:
2.1 million tons
Olavarría,
Buenos Aires,
Argentina
16 turbines
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INVESTMENT
$2.2 Billion
EAF- based
steel shop
2.6 million tons
INVESTMENT
$160 million
NOMINAL CAPACITY
72 MW
The project also includes the construction of a port facility in Brownsville, Texas, for the handling of raw materialThe power generation capacity of the wind farm could increase in the future
BEYOND 2030
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The company has partnered with Tecpetrol and Tenova to study carbon
capture and storage solutions, as well as green hydrogen applications.
Ternium is also considering producing e-fuels, and evaluating initiatives
for the production and use of biomass, along with other nature-based
solutions to enhance atmospheric carbon capture like reforestation.






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16. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
TERNIUM AT A GLANCE
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12
MILLION TONS
OF STEEL SHIPMENTS (2022)
$16
BILLION
OF NET SALES (2022)
 +20,500
EMPLOYEES


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9
COUNTRIES

6
INTEGRATED FACILITIES

12
DOWNSTREAM FACILITIES

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28
SERVICE CENTERS
23
DISTRIBUTION CENTERS


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18. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
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DELIVERING OUR
BUSINESS STRATEGY
SUSTAINABLE DEVELOPMENT GOALS
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ELEMENTS OF OUR BUSINESS STRATEGY & ACTIONSKPIs
 
ELEMENTS OF OUR BUSINESS STRATEGY
 
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__
 
 
Focus on sophisticated steel products
Pursue strategic growth opportunities
Enhance Ternium´s competitiveness by:
    _ a full product range offering,
    _ operational excellence by incorporating cutting-edge technologies and integrating Ternium's industrial system
    _ differentiated services with a strong distribution network

11.9
MILLION-TON SHIPMENTS
(2022)
$16.4
BILLION IN NET SALES
(2022)
ACTIONS_
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Initiating activities at the new hot-rolling mill in Pesquería in 2021
Announcing new downstream projects in 2022 with start-ups in 2024 and 2025, including a push-pull pickling line, a cold rolling mill, a hot-dip galvanizing line and additional finishing lines
Launching an upstream project in our state-of-the-art industrial center in Pesquería, Mexico, in 2023
Establishing a new R&D center in Pesquería to further expand Ternium's capabilities
Launching a wind farm project to replace 65% of the electricity purchased from third parties providers in Argentina
Increasing Ternium's participation in Usiminas' control group (2023)
Improving customer service systems through Ternium Activo and a marketing chatbot
Developing the Smart Factory concept, including the implementation of new stages in the simulator program for training in safety and evaluation of industrial processes

21%
EBITDA MARGIN
(2022)
$581
MILLION IN
CAPITAL EXPENDITURES
(2022)


20. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY

STRENGTHENING TERNIUM'S PRODUCTION SYSTEM:
STRONG PRESENCE IN THE AMERICAS

Ternium’s goal is to increase value for stakeholders
by further consolidating its position as a top steel producer in Latin America and a prominent player in the Americas. Its business strategy consists of three key
elements: actively seeking growth opportunities, emphasizing the production of high value added products, and continuously striving for efficient and competitive industrial operations.

The company has a track record of strategic business
growth through acquisitions and organic expansion. In
Mexico, its primary market, Ternium initially acquired
two large industrial companies: Hylsamex and Grupo Imsa in 2005 and 2007, respectively. In 2013, Ternium established the Pesquería Industrial Center, a state-of-the-art greenfield project focused on advanced technology and sustainability. This expansion facilitated the company's diversified steel product portfolio, particularly for the automotive sector.

During the last twenty years, the Mexican market has
experienced significant growth, mainly driven by a dynamic manufacturing industry. According
to worldsteel’s data, apparent steel consumption in
Mexico increased at an average compound annual growth rate of 3% between 2000 and 2022. Moreover, the composition of steel supply in the country has created opportunities for import substitution.

In this context, Ternium made a series of investments
to strengthen and consolidate its presence in Mexico.
The first investment addressed the insufficiency of slabs production in Ternium´s industrial scheme in Mexico, given the higher downstream installed capacity. In 2017, Ternium acquired a slab mill in Rio de Janeiro, Brazil, with a production capacity of 5 million tons per year. This acquisition increased the company's total crude steel production capacity by approximately 70% to 12.4
million tons. Currently, the main destination of Brazilian slabs is the Pesquería facility in Mexico and a small portion is sold in the Brazilian market.

57%
OF TERNIUM'S STEEL SHIPMENTS
WERE SOLD IN MEXICO (2022)



37%
INCREASE IN SHIPMENTS IN MEXICO
SINCE INAUGURATION OF PESQUERÍA
INDUSTRIAL CENTER IN 2013






Ternium’s second investment focused on expanding
its product range and incorporating higher value added
products to cater to a more demanding market. In 2021, the new advanced hot rolling mill in the Pesquería Industrial Center started operations and we built a research and development center to support the manufacturing activity. This has led to a significant reduction in testing and certification time for highly specialized industries, including the automotive sector.The complete project includes other downstream facilities like a push-pull pickling line, a cold-rolling mill, a hot-dip galvanizing line and finishing lines, which are slated to begin operations in 2024 and 2025.

Recent developments have prompted a reevaluation of the Pesquería Industrial Center's capabilities, leading to further enhancements. As an example, the rule of origin of the USMCA (United States-Mexico-Canada Agreement) trade agreement, states that duty-free trade in the automotive sector is only available for goods that can be considered as originated from anyone of the member countries starting from 2027.

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Pesquería New Hot Rolling Mill - The process of coil formation is carried out through hot rolling equipment.
As a result, in early 2023, Ternium announced the
construction of a new steelmaking facility comprising
an electric-arc-furnace-based steel shop, a DRI
module and a port. These facilities are set to produce high quality steels required for demanding applications, particularly in the automotive industry. The project is scheduled to commence operations in 2026, significantly increasing the company´s competitive position in the Mexican market. Notably, the new DRI module will incorporate carbon capture capabilities and be adaptable for transitioning from natural gas to hydrogen use when feasible, aligning with Ternium’s medium-term decarbonization goals.

As the market grows and trends like the nearshoring of the steel value chain emerge, Ternium reinforce its commitment to the industry by delivering high-quality steels and enhancing its commercial services.

Ternium strengthens its presence in Latin America

Ternium’s objective is to identify and pursue strategic opportunities for growth, enabling the company to strengthen its position in key markets throughout the
Americas. The focus is on enhancing its industrial system integration across operations in Mexico, Brazil, the US, Argentina, Colombia, and other countries. This involves broadening the range of value-added products and improving its production and distribution capabilities.

In Argentina, Ternium is the leader in the country's flat steel industry, which is the third largest in Latin America. With manufacturing customers accounting for around half of the local flat steel consumption, there are ample opportunities to offer value-added products and services. Through initiatives like the ProPymes program, the company has fostered strong connections within the local industrial cluster and supported the growth of medium and small enterprises, positioning itself favorably in the competitive landscape.

In Colombia, the fourth largest steel market in Latin
America, Ternium has expanded its capacity by
establishing a reinforcing bar facility in Palmar
de Varela in 2020. Additionally, the company owns finishing lines and service centers in Guatemala,

22. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
INGREASING OUR PARTICIPATION
IN THE USIMINAS CONTROL GROUP
In March 2023, Ternium announced an agreement with Nippon Steel to acquire a portion of its stockholding, thus increasing Ternium’s stake in Usiminas’s control group.

The Usiminas control group holds the majority of the company's voting rights. With the recent closing of this transaction, Ternium now holds an aggregate participation of 51.5% in the control group. The Usiminas control group has also agreed a new governance structure. Ternium and its related companies will nominate a majority of the Usiminas board of directors, the CEO and four other members of Usiminas board of officers.

Usiminas is one of Brazil’s major producers of flat steel products, including iron ore mining, steel production, and steel processing and customization. In 2022, Usiminas shipped 4.2 million tons of steel products, of which 86% were directed to the Brazilian market, and 8.6 million tons of iron ore, with total net sales of BRL 32.5 billion.

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1ST
FLAT STEEL PRODUCER IN BRAZIL
(AÇO BRASIL 2022 FIGURES)
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51.5%
TERNIUM'S PARTICIPATION IN
USIMINAS' CONTROL GROUP
El Salvador, Nicaragua and Costa Rica, providing a widespread presence in Central America.

With its industrial footprint, network of distribution centers and commercial offices, Ternium is well equipped to offer differentiated logistics and stock management services. This gives the company a competitive advantage in major steel markets.


DELIVERING SOPHISTICATED STEEL PRODUCTS

Ternium’s product development roadmap aims to increase the participation of higher margin value added products in the sales mix, with a special focus on the expansion of Ternium’s offering of resistant and lightweight steel products for low carbon economy applications.

The start-up of the new hot-rolling mill in 2021
represented a technological leap forward in Ternium Mexico’s steel production capacity and strengthened
its positioning in the high-end market sector. In this
sense, the development of substrates for galvanized top quality exposed parts with very high drawability requirements was one of the milestones achieved during the first months of operation of the new hot-rolling mill.

In 2022, the company intensified the product development activities to expand its high-end product portfolio for customers in the automotive, metal mechanic, home appliance, energy and electric motors industries. During the year we completed the design of new substrates to replace some of the hot-rolled steel products procured from third parties. This development will allow Ternium to become fully compliant with the new USMCA rules of origin in connection with the supply of galvanized products to the automotive industry. We also developed new hot-rolled steel products prototypes for the automotive industry to replace imported material. This industry holds a significant share in Ternium's shipments in Mexico, representing 24% in 2022.

Ternium also launched innovative coated steel coils that combine eco-friendly materials with energy-saving solutions for the construction sector. The company expanded its product range by developing coiled plates up to one inch, catering to the needs of the structural steel market.

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Moreover, the company advanced its project to incorporate co-laminated finishing to its product offering. This new technology will enable us to offer steel products with superior aesthetic attributes for architectural and appliances designs. We are undergoing the product certification process and expect to start production soon.

Additionally, new features were introduced to the pre-painted products for motor casings, with the potential for implementation in home appliances. These new features provide new coating types that closely resemble stainless steel.

Ternium is utilizing its newly established R&D center in Pesquería, Mexico to secure steel product certifications for industrial customers. The facility has been accredited to ensure compliance with international regulations and customer specifications. In 2022, Ternium obtained 89
new product approvals for the automotive sector,
mainly attributed to the operation of its modern hot-rolling mill in Pesquería. This marks a substantial growth compared to the previous year. Additionally, the hot-rolling mill achieved ISO 9001 certification as a first step to being certified in 2023 under IATF 16949.

Ternium empowers future technological advancements with enhanced R&D capabilities

Ternium operates research facilities with laboratories in Mexico, Brazil and Argentina. These labs are used to conduct product performance tests and simulate
production processes. The incorporation of the R&D
Center in Pesquería, which features physical modeling,
simulation of industrial processes, robotized testing,
and full-scale welding processes, has enhanced the
company's ability to evaluate technical characteristics
and explore new product functionalities.






tx_sr2022xterniumstrategyxj.jpg
Ternium's Pesquería R&D Center: Technical evaluation and innovation with advanced facilities for physical modeling, process simulation, and testing.

24. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
tx_sr2022xterniumstrategyxk.jpg
Innovative steels for Vaca Muerta
In 2022, Ternium and its sister company Tenaris collaborated in developing new steels for welded tube manufacturing in gas and oil infrastructure projects at the Vaca Muerta shale field in southern Argentina.


THE COMPANYENVIRONMENTAL
SOCIAL
GOVERNANCE
ANNEXES
25
In 2022, Ternium made further investments to strengthen its R&D infrastructure. The second phase of the R&D project in Pesquería, Mexico was launched, and advanced electronic microscopes were installed in the laboratories of Argentina and Brazil. This allowed the company to bring the microscopy service in-house, previously outsourced to third parties. As a result, Ternium was able to accelerate optimization efforts in steelmaking operations, with a focus on producing environmentally friendly steels and ensuring the reliability of its products.

Ternium forms strategic partnerships for joint research

Ternium’s in-house research activities are complemented by its involvement in a global network of industry consortia, universities, and research centers. One notable example is its membership in WorldAutoSteel, an organization comprising major steel producers worldwide. Ternium actively participated in the engineering core team of the Steel E-Motive project, sponsored by WorldAutoSteel, in the design of cost-effective, safe, and sustainable autonomous and connected electric vehicles using cutting-edge engineering and advanced high-strength steel technologies.

Additionally, Ternium partners with universities on joint initiatives, fostering the involvement of researchers and students from prestigious institutions in early-stage development projects. These research initiatives cover the entire production cycle, including primary steelmaking, metallurgy, rolling and coating processes.

In 2022, the company continued developing joint projects along its value chain. They included the development of new steel products with Tenaris, a related company, for the manufacturing of welded pipes designed for Monterrey’s new water pipeline in Mexico and for infrastructure projects at Argentina’s Vaca Muerta oil and gas shale formation. The synergies identified in developing projects with leading industrial companies enable Ternium to anticipate market requirements, plan new processes, incorporate new equipment and technology, and build strong customer relationships.


SECOND PHASE OF R&D CENTER IN PESQUERÍA, MEXICO

Ternium's newly inaugurated R&D center in
Pesquería, Mexico (2021), entered the second
phase of its investment project, which focuses
on installing a new galvanizing simulator. This
state-of-the-art equipment is expected to be fully
operational by the first quarter of 2024, enabling
the company’s capabilities to conduct in-house
simulations that were previously outsourced
to third-party facilities. This advancement will
significantly expedite the development cycle for
new coated products.

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$14.5
MILLION OF CUMULATIVE INVESTMENT IN R&D IN PESQUERÍA (2022)





Ternium’s customer technical assistance activities are focused on maximizing the performance of steel products and the efficiency of manufacturing processes in the steel industry’s value chain, supported by the company’s product R&D capabilities. In this regard, the
company has jointly developed new steels with a customer and a service supplier for a tray prototype designed for rock transportation. Additionally, Ternium has jointly developed structural steels with a plate producer for wind energy towers, as well as galvanized steels with a manufacturer of solar panels for supporting structures.

26. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
53%
OF TERNIUM SHIPMENTS IN MEXICO
WERE DESTINED TO THE INDUSTRIAL
SECTOR (2022)



48%
OF TERNIUM SHIPMENTS IN ARGENTINA
WERE DESTINED TO THE INDUSTRIAL
SECTOR (2022)

ENHANCING TERNIUM'S COMPETITIVE EDGE

Ternium’s broad range of value-added products, just-in-time delivery, inventory management and other services offered to customers in major steel markets are supported by the company’s service center, distribution, sales and marketing networks.

As part of its customer retention strategy, the company
regularly assesses customer satisfaction through
client surveys in its main markets. In 2022, customer
satisfaction rates stood at 83% in Mexico, 83% in
Argentina, and 94% in Colombia, based on a sample
that represented approximately 70% of the company's
shipments in each market.

Ternium operates its industrial system on a unified IT
platform, enabling seamless coordination in offering
a wide range of products and services to its customer
base. In 2022, the company implemented several
enhancements in its customer engagement tools.


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Pushing new limits: Uniting industrial excellence and IT integration for seamless product and service coordination

THE COMPANYENVIRONMENTAL
SOCIAL
GOVERNANCE
ANNEXES
27
The "Webservice" platform was upgraded to "Ternium Activo," which features an improved, personalized,
and faster navigation interface. Additionally, Ternium
is currently undertaking business-to-business (B2B)
developments with automotive clients to enhance
integration, reduce lead times, and eliminate manual
order input. These ongoing projects aim to deliver
significant benefits for both Ternium’s customers and
the company itself.

Throughout the year, the company made significant
progress in the development and implementation of
the Chatbot project, which was initiated in 2021
to address customer information needs. This tool harnesses the power of cognitive artificial intelligence
and seamlessly synchronizes with the company's
systems in real-time. Through platforms like
WhatsApp, customers can access valuable information
regarding Ternium’s production cycles, order updates,
logistics details, and account status. Initially focused
on customers in Mexico, the application has now expanded its availability to include counter sales in

Central America and the Caribbean. Moreover, a pilot
project is scheduled for launch during 2023, targeting
customers in Argentina.

In addition to developing a full range of steel products
and delivering differentiated services to Ternium’s
customer base, it aims to enhance the company’s
competitive position by seeking excellence in
operational performance. The quest for operational
excellence relies on the cross implementation of
Ternium’s managerial, commercial and production best
practices.

Throughout 2022, Ternium made progress in testing
the migration of its SAP system to the SAP HANA
version. This comprehensive project covers the
functionalities of Maintenance, Accounting, Costs,
Inventory, and Procurement, and aims to unify the
entire company under a single system.

One of the major challenges for the implementation of this system has been the multicultural nature of the
DIGITAL PLATFORM UPGRADE ENHANCES CUSTOMER EXPERIENCE
In 2022, Ternium launched its new platform, Ternium Activo, as the primary point of contact with its customers. Customers can conduct all their commercial transactions, check status, review credit history, and more through this digital platform.

The development focused on three aspects: visual impact, structure and functionality, and personalization. Ternium Activo aims to provide
users with a personalized experience, simplifying processes and providing self-management support tools.

Currently implemented for all customers in Argentina, Ternium plans to expand it to Mexico and integrate it into all other countries where the company operates.
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129
         FEATURES AVAILABLE
         ON THE PLATFORM
3,800
USERS REGISTERED
ON THE PLATFORM
UP TO DATE
 +95%
OF CUSTOMER ORDERS IN ARGENTINA PLACED THROUGH THE PLATFORM

28. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
Ternium expects to implement
SAP HANA for the entire company
by 2024. This project unites Maintenance, Accounting, Costs, Inventory and Procurement functions under one integrated system.






participants, as it involves all Ternium personnel worldwide.

The company also collaborates in providing technological assistance to related companies. In 2022, we initiated an important project to improve the operation and maintenance of a related company´s blast furnaces in Brazil, extending our best practices.


COMPETITIVENESS AGENDA: SMART FACTORY

SMART is the acronym for Social, Mobile, Analytics, Robotics and (internet of) Things. Ternium is making progress in the deployment of new digital technologies that are leading to step improvements in its operating performance. These new solutions are based on the processing and analysis of a constant stream of information and knowledge from Ternium’s industrial operations (data and events provided by meters, cameras and drones).

In order to support Ternium’s analytics needs across
all business functions, the company has implemented a
Data Lake, a single technological platform that meets
all the company’s big data and analytics requirements.
SMART factory applications include a wide array
of company functions such as order management,
administration, human resources, maintenance,
quality, and occupational health and safety. Solutions
encompass mobile and remote work; remote assistance
(augmented reality); personnel training (virtual reality
simulation); the execution of automated administrative
processes and tasks (robots); and the real-time
autonomous detection of unsafe conducts or situations,
the autonomous assessment of difficult-to-access
building structures and equipment, and the appraisal
of bulk material (automatic image interpretation
through artificial intelligence).

SMART factory applications also include the automated handling of steel products in the yards (RFID and WMS), and the prediction of failures in maintenance management (predictive analytics and data correlation). Ternium’s RFID system has been installed at several stockpile yards for identifying and tracking each coil from the moment it reaches the yards up to shipment, facilitating inspection procedures, improving inspectors’ safety and reducing operations lead times.

The slab continuous casters at the company’s Brazilian, Mexican and Argentine facilities use analytics and data correlation technology for maintenance purposes. The plan is to extend this technology to the company’s main flat steel hot-rolling, cold-rolling and galvanizing lines to shield strategic equipment and reduce interruptions, thus increasing the reliability of operations while lowering costs.

In 2022, the company's supply chain and systems teams developed a logistics center at the San Nicolas plant in Argentina, allowing real-time tracking and generating early alerts that enable timely decision making. The logistics center facilitates transport planning and real-time tracking of logistics execution, optimizing the use of warehouses and trucks.

Technology is present in all aspects of Ternium’s business, and one of the most significant and long-term impact activities is training. Among the most important objectives of using IT tools in training activities are the reduction of accident rates by reproducing high-severity incidents, improving work team performance by simulating everyday tasks and the tools used and by simulating the behavior of the main production lines to improve operating conditions or achieve new products in a controlled environment prior to industrial testing.

THE COMPANYENVIRONMENTAL
SOCIAL
GOVERNANCE
ANNEXES
29
DEVELOPING A SUSTAINABLE
EXPORT SOLUTION


Ternium has undertaken a project aimed at improving operations and reducing environmental impact in the export of slabs from Brazil to Mexico. This collaborative effort involved Ternium’s Global Logistics team in Uruguay, as well as the Supply Chain teams in Mexico and Brazil.

The key component of this initiative was the installation of cranes equipped with magnets at the port of Brownsville, USA.

These cranes facilitate the efficient unloading of Ternium Brazil’s slabs, which are then transported to Ternium’s Industrial Center in Pesquería, Mexico.

The implementation of this process has resulted in a significant reduction in the use of wooden dunnage for cargo securing.

As a result, approximately 26,700 trees are saved each year, leading to both environmental benefits and increased operational productivity.
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$2.8
MILLION IN COST REDUCTION PER YEAR
SUSTAINABLE PROCUREMENT

While Ternium handles slab procurement directly,
the centralized procurement of raw materials and
industrial services is entrusted to Exiros, a company
established jointly with our related company, Tenaris.

By utilizing the combined purchasing power of both
companies, Exiros has built an extensive network
of suppliers, with nearly 49,000 registered and over
15,000 active vendors in 2022. Among these, 7,300
suppliers specifically cater to Ternium’s requirements.
The procurement services offered by Exiros are
certified under the ISO 9001 standard, ensuring a high
level of quality.

When evaluating suppliers, Ternium insists that all its business partners adhere to the same rigorous standards that the company upholds. These standards encompass ethical conduct, legal compliance and the fulfillment of health, safety, and environmental obligations. Alongside the Supplier Code of Conduct, Ternium has recently introduced a Sustainable Purchasing Policy to further engrave its dedication to sustainability throughout the supply chain. Ternium will actively oversee the implementation of these principles, either independently or with the assistance of third parties, as determined by the nature of the business relationship and its impact on Terniums operations.

Additionally, Exiros carries out yearly audits to
evaluate the health and safety practices of its suppliers.
These audits serve as a prerequisite for awarding or
renewing service contracts, and they play a crucial role
in long-term risk management. As of December 2022,
Exiros has successfully audited and certified 94% of its active service suppliers, who were classified based
on a rigorous criterion pertaining to health, safety,
and environmental risks. The audit process follows
Ternium’s standardized self-assessment procedure,
which has been specifically tailored for suppliers offering services. In 2022 alone, a total of 525 new audits were conducted.







30. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
LEADING THE DEVELOPMENT OF THE MEXICAN STEEL INDUSTRY
TERNIUM'S GROWTH STRATEGY
Ternium aims at increasing stakeholder value by strengthening its position as a top steel producer across the Americas.
Strategy: differentiation, high-value added products,
efficient operations
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a0213.gif
Progressive growth in steel consumption in the Mexican marketImport substitution opportunities for local industries
3%ANNUAL GROWTH RATE (CAGR) OF APPARENT STEEL USE IN MEXICO FROM 2000 TO 202240%OF NET IMPORTS
PARTICIPATION IN THE COUNTRY’S APPARENT FLAT STEEL USE (2022)
   a032a.gif

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Opportunity to serve manufacturing activity with high-value-added products
Relocation of manufacturing activities within the steel value chain (nearshoring)Compliance with the rules of origin set under the USMCA agreement
$35B
66%OF INDUSTRIAL CUSTOMERS PARTICIPATION IN THE COUNTRY’S APPARENT FLAT STEEL USE (2022)$35BINCREMENTAL ANNUAL EXPORTS OF GOODS AND SERVICES FROM MEXICO According to Inter-American Development Bank (IDB)70%
 
OF THE STEEL PURCHASED BY OEMs MUST BE "MELTED AND POURED" IN THE USMCA REGION BY JULY 2027
TERNIUM’S CURRENT PRODUCTION SYSTEM IN MEXICO
STEELMINING  ENERGY
12
STEEL PRODUCTION
AND/OR PROCESSING
UNITS
a064a.gif
100%
INTEREST IN LAS ENCINAS
 
50%
INTEREST IN CONSORCIO
PEÑA COLORADA
900
MW OF CAPACITY

TERNIUM SECURES THE SUPPLY OF ELECTRICITY IN MEXICO WITH A 78% PARTICIPATION IN A POWER PLANT JOINT VENTURE (TECHGEN)
 
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12
DISTRIBUTION
CENTERS ACROSS
THE COUNTRY
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THE COMPANYENVIRONMENTAL
SOCIAL
GOVERNANCE
ANNEXES
31
RECENTLY ANNOUNCED PROJECTS IN THE USMCA REGION
  MID 2024
  1st HALF 2025
  END 2025
  1st HALF 2026
infomex_arrow1a.gif
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a11a.gif
a12a.gif
a13a.gif
Push-pull pickling line
PRODUCTION CAPACITY
550,000 TPY
Painting line
PRODUCTION CAPACITY
120,000 TPY
Sheverport, USA
Cold-Roll line
PRODUCTION CAPACITY
1.6 million TPY

Hot-dip galvanizing line
PRODUCTION CAPACITY
600,000 TPY
Pesquería, Mexico
Upstream Project Pesquería, Mexico
EAF-based steel shop
PRODUCTION CAPACITY
2.6 million TPY

DRI Module
PRODUCTION CAPACITY
2.1 million TPY
Finishing lines
Pesquería, Mexico
NEW UPSTREAM PRODUCTION CAPACITY PROJECT
In 2023, Ternium announced a new steelmaking facility with an electric-arc-furnace-based steel shop & DRI module. The new DRI module will include carbon capture capabilities and readiness to switch from natural gas to hydrogen use.Operations are scheduled to start in 2026,
in line with Ternium's decarbonization goals
for the production of crude steel with low carbon content.
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Port facility
Construction for raw material handling
a15a.gif
DRI module
For the
production of DRI
a16a.gif
EAF-based steel shop
Steel production

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  infomex_arrow2a.gif
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$2.2 B
Total investment
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Scrap yard
Selection and preparation
of metal scrap
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Consteel®
Continuous scrap charging and preheating system
infomex_arrow3a.gif
2026
Start-up expected in the 1st half



32. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
ECONOMIC & FINANCIAL PERFORMANCE
In 2022, Ternium achieved a high level of profitability and generated significant cash from operations. Net sales were $16.4 billion, including steel products net sales of $16.1 billion on steel shipments of 11.9 million tons, other products net sales of $322.8 million and iron ore products net sales of $410.8 million on iron ore shipments of 3.5 million tons. The majority of the iron ore production was consumed by our company's operations. Steel revenue per ton was $1,353, up $45 compared to revenue per ton in the prior year mainly reflecting a higher value sales mix in connection with the integration of Ternium’s industrial system.

During 2022, shipments in the Mexican market stood at 6.8 million tons, an increase of 5% compared to 2021, representing 57% of Ternium’s total steel shipments. Shipments in the Southern Region reached 2.4 million tons, or 20% of Ternium’s consolidated shipments in the steel segment, most of which were destined to the Argentine market. Shipments in the Other Markets region reached 2.7 million tons in 2022, or 23% of Ternium’s consolidated shipments in the steel segment.



Our major shipment destinations in the Other Markets region are usually the United States, Brazil, Colombia and Central America.

Operating income reached $2.7 billion, with Adjusted EBITDA of $3.4 billion. Adjusted EBITDA per ton reached $287 in 2022, decreasing $199 year-over-year on higher cost per ton, partially offset by slightly higher realized steel prices. The company’s net income in 2022 was $2.1 billion. Equity holders’ net income in 2022 was $1.8 billion, equivalent to earnings per ADS of $9.00.

Net cash provided by operating activities was $2.8 billion, with free cash flow of $2.2 billion after capital expenditures of $580.6 million. During 2022, Ternium advanced diverse projects throughout its main facilities, including those for further improving environmental and safety conditions and additional works in the new hot-rolling mill at the company’s Pesquería industrial center in Mexico. Ternium reached a net cash position of $2.6 billion at the end of December 2022.



a027.gif
$1.2
BILLION
IN EMPLOYEES
$581
MILLION
IN CAPEX
$842
MILLION
IN TAXES
$11.7
BILLION
IN SUPPLIERS
$16.4

BILLION IN ECONOMIC
VALUE GENERATED
(2022)
$21
MILLION
IN COMMUNITY
$577
MILLION
IN CAPITAL PROVIDERS
$16
MILLION
IN RESEARCH
& DEVELOPMENT


THE COMPANYENVIRONMENTAL
SOCIAL
GOVERNANCE
ANNEXES
33

20222021202020192018
STEEL SALES VOLUME (THOUSAND TONS)
Mexico
6,843 6,534 5,913 6,305 6,545 
Southern Region
2,362 2,503 1,924 1,938 2,301 
Other Markets
2,691 3,028 3,523 4,268 4,105 
Total11,896 12,065 11,360 12,511 12,951 
IRON ORE SALES VOLUME (THOUSAND TONS)3,457 3,809 3,797 3,576 3,616 
ECONOMIC AND FINANCIAL INDICATORS ($ MILLION)
Net sales16,414 16,091 8,735 10,193 11,453 
Operating income2,7005,271 1,080 865 2,108 
Adjusted EBITDA
3,415 5,863 1,525 1,526 2,698 
Profit for the year attributable to:
  Owners of the Parent
1,768 3,825 779 564 1,507 
Non-controlling interest
325 542 89 66 156 
Profit for the year2,093 4,367 868 630 1,663 
Capital expenditures 581 524 560 1,052 520 
Free cash flow2,172 2,154 1,201 595 1,219 
BALANCE SHEET ($ MILLION)
Total assets17,492 17,098 12,856 12,936 12,548 
Total liabilities3,723 4,863 4,413 5,221 5,063 
 Borrowings1,032 1,479 1,723 2,189 2,037 
Net (cash) debt (2,597)(1,155)372 1,453 1,735 
Capital and reserves attributable to the owners of the parent11,846 10,535 7,286 6,612 6,393 
Non-controlling interest1,922 1,700 1,157 1,103 1,091 
STOCK DATA ($)
Basic earnings per ADS9.00 19.49 3.97 2.87 7.67 
Approved dividend per ADS2.70 2.60 2.10 — 1.20 

Alternative performance measures
Non-IFRS measures should not be considered in isolation of, or as a substitute for, measures of performance prepared in accordance with IFRS. Non-IFRS measures do not have a standardized meaning under IFRS and, therefore, may not correspond to similar non-IFRS financial measures reported by other companies.

Adjusted EBITDA: equals net income of $2.1 billion adjusted to exclude net financial results of $70 million, income tax expense of $574 million, depreciation and amortization of $617 million, equity in results of non-consolidated
companies of $37 million (loss) and, in the fourth quarter of 2022, the impairment of Ternium's investment in Ternium Brasil of $99 million.

Free cash flow: Free cash flow equals net cash provided by operating activities of $2.8 billion less capital expenditures of $581 million in 2022.

Net (cash) debt: equals borrowings of $1.0 billion less the consolidated position of cash and cash equivalents and other investments of $3.7 billion in 2022.
Direct Economic Value Generated: equals net sales plus interest income, proceeds from the sale of property, plant & equipment, other operating income, equity in earnings of associated companies and inflation adjustment results, less other financial losses. “Employees” equals labor costs. “Taxes” equals current income tax expense plus cost of sales and SG&A taxes, less the effect of changes in tax law. “Suppliers” equals cost of sales plus SG&A, less labor costs, depreciation of property, plant and equipment, amortization of intangible assets, allowance for obsolescence, cost of sales and SG&A taxes, R&D expenditures and community investments. “Capital Providers” equals dividends paid in cash to company’s shareholders and non-controlling interest, plus interest expense.




34. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
tx_sr2022xterniumstrategyxg.jpg
Galvanizing line at the Pesquería Plant
This robot functions as a "labeler", applying identification labels with chips to each coil produced. The labels are then read by the system providing real-time location information for each of the coils.

THE COMPANYENVIRONMENTAL
SOCIAL
GOVERNANCE
ANNEXES
35
KEY FIGURES
STEEL SHIPMENTS
MILLION TONS
chart-e27b7fa6e9e54877aeaa.jpg
CAPITAL EXPEDITURES
$ MILLION
chart-52a417d79870413fafca.jpg

ADJUSTED EBITDA
$ BILLION
chart-2f042d2b2b92403da21a.jpg
ANNUAL DIVIDENDS
$ PER ADS
chart-a8af9e4b7b824d18afda.jpg



tx_sr2022xesgxokx1a.jpg



tx_sr2022xesgxokx2a.jpg


38. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
a0124a.gif
ADDRESSING CLIMATE CHALLENGES: STRATEGIES FOR A SUSTAINABLE FUTURE
SUSTAINABLE DEVELOPMENT GOALS
sdggoal07a.jpg sdggoal08a.jpg sdggoal09a.jpg sdggoal12a.jpg sdggoal13a.jpg sdggoal17a.jpg
tx_sr2022xclimatechangexoka.jpg


THE COMPANY
ENVIRONMENTAL
SOCIAL
GOVERNANCE
ANNEXES
39
goalsa.gif
GOALS & ACTIONS


KPIs
 
GOALS
 
_
 
_


_
_
 
Reduce by 20% the emission intensity rate for our steelmaking sites (scopes 1 and 2) by 2030 compared to 2018 baseline
Plan and implement decarbonization strategies with the aspiration of achieving carbon neutrality in our products and operations, subject to technological feasibility and local market conditions
Make an efficient use of energy resources
Work alongside our supply chain to reduce GHG emission
$19.4
MILLION INVESTED IN
DECARBONIZATION RELATED
PROJECTS (2022)
1.7 CO2
PER TON OF CRUDE STEEL (SCOPES 1 & 2)
ACTIONS_

_

_
_

_

_

_

_

_
Establishing a climate change governance structure, including Board oversight and a decarbonization committee
Incorporating a scenario analysis to assess asset vulnerability to physical risks
Using an internal carbon price for project evaluation
Developing a roadmap with key projects, annually reviewed, to achieve our 20% intensity reduction goal by 2030
Activating the upstream DRI-EAF project in Pesquería, Mexico, to reduce Terniums's average emissions intensity rate
Launching a wind farm project in Argentina with operations beginning in the second half of 2024
Participating in initiatives to establish a decarbonization path for the steel industry
Consolidating the company's energy efficiency program through locally defined initiatives under a unified corporate framework
Strengthening the company's management system by including:
the certification under ISO 50001 standard,
a third-party verification of emissions under GHG Protocol and worldsteel methodology,
introduction of data processing systems to improve its granularity and analysis,
supplier data collection
27%
STEEL SCRAP CONTENT PER
TON OF CRUDE STEEL
84%
STEEL PRODUCED AT ISO 50001 CERTIFIED FACILITIES
22.7 GJ
CONSUMED PER TON OF
CRUDE STEEL

40. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
THE ROLE OF THE STEEL INDUSTRY IN ADDRESSING CLIMATE CHANGE

Steel has played a critical role in shaping modern economies and societies. Its strength, versatility, and durability have made it a fundamental component in modern civilization, from buildings and bridges to cars and household appliances. However, the steel industry is also a major contributor to greenhouse gas emissions, accounting for 7% to 9% of global anthropogenic CO2 emissions according to worldsteel figures. As the world seeks to transition to a low-carbon economy and mitigate the effects of climate change, the steel industry faces the significant challenge of reducing its carbon footprint while attending to the likely increase in global steel demand.

In this context, one of the main challenges in decarbonizing the global steel industry has to do with the fact that most of its production processes heavily rely on coal and other fossil fuels. Currently, close to 71% of global steel production is made through the blast furnace route, with an average global intensity rate of 2.32 tons of CO2 per ton of crude steel (tCO2/t crude steel) according to 2021 worldsteel’s data. There are alternative production routes with lower emission intensity rates, such as electric arc furnaces based on direct reduced iron (DRI) or scrap, with global average intensity rates of 1.65 tCO2/t crude steel and 0.67 tCO2/t crude steel, respectively (2021 worldsteel´s data accounting for scopes 1, 2 and 3 based on its sectoral approach methodology).

However, the selection of the production route depends on the availability and the cost-efficiency of resources, given that the steel industry operates in a highly competitive scenario. As developing economies advance and infrastructure enters a replacement phase, the availability of obsolete scrap will increase, which in turn could support a shift from steelmaking technologies based on iron ore to those relying more heavily on steel scrap. Over time, this shift could have a significant impact on iron ore and steel scrap consumption trends globally.

On the energy side, while renewables availability has improved in the last years, major projects must be executed to replace traditional energy sources and market conditions must be set by local governments incentivizing this transition.

Steel, with its versatility, strength, durability, and infinite recyclability, stands as the foundation of a sustainable transition, enabling a circular economy, reducing environmental impact, and meeting evolving global needs.












Access and availability of renewable energy sources such as wind, solar, and hydropower are also an essential element in the transition to a low-carbon economy. Renewable energy plays a pivotal role in the production of green hydrogen as part of a more advanced stage of decarbonization projects. This is because the electrolysis process used to produce green hydrogen relies heavily on electricity, and if this electricity comes from non-renewable sources, the process may not be carbon-neutral as expected.

As the world shifts towards a low-carbon economy, the steel industry plays a critical role. It has the ability to produce steel to be used in renewable energy infrastructure, such as wind turbines and solar panels. Additionally, steel solutions like carbon capture and storage technology contribute to decarbonization efforts. Moreover, lightweight high-strength steel is vital for helping other industries, like automotive, decarbonize their activities.


THE COMPANY
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Manizales plant, Colombia. 100% scrap-based facility for the production of long steel, Manizales is among Ternium's lowest emission intensity sites.
With that spirit, reduction of emission intensity rate and improvement of energy efficiency in operations are top priorities in Ternium’s climate change agenda.


TERNIUM'S PATH TO REDUCE CARBON EMISSIONS:
A CLOSER LOOK AT THE COMPANY'S DECARBONIZATION ROADMAP

In 2021, Ternium announced a medium-term target of a 20% reduction in its CO2 emission intensity rate at its steelmaking sites by 2030, considering scopes 1 and 2 emissions, compared to 2018 levels.

To achieve this medium-term goal, Ternium developed a comprehensive roadmap that takes into account its production settings, mature technologies, available
resources, local regulations, and the national commitments made by countries under the Paris Agreement. The resulting strategy comprises six key axes: Increasing the use of DRI-EAF in the production mix; expanding carbon dioxide capture and usage capacity; increasing the use of renewable sources in the energy mix, further advancing Ternium’s energy efficiency program, intensifying the use of scrap in the metallic mix, and partially substituting metallurgical coal with biomass.

Given the relevance of climate change for Ternium’s overall business, the company's board of directors conducts quarterly reviews of the development and implementation of its decarbonization strategy. To ensure an effective progress tracking, the Board nominated its Vice-Chairman to oversee, on a quarterly basis, Ternium's climate change strategy. Additionally, Ternium has established a decarbonization committee,

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with the CEO's participation, commissioned with monitoring project execution, market trends, regulatory changes, and proposing new courses of action to achieve the company's decarbonization objectives.

Ternium has recently disclosed its plans to execute significant projects over the next few years in line with its decarbonization roadmap. The most relevant project is the construction of new upstream production capacity at our Pesquería facility based on DRI-EAF technology. This project aims to increase the participation of this route from 29% to 39% by the year 2026. The DRI module will be readied, as the rest of our DRI modules in Mexico, to switch from natural gas to green hydrogen use.

The company also announced a wind farm project in Argentina, which involves an investment of
approximately $160 million. The wind farm will replace 65% of the electricity purchased from third parties in Argentina, resulting in a reduction of 92,500 tons of CO2 emissions per year.

In the long term, achieving carbon neutrality will depend on multiple technological breakthroughs, and Ternium, along with its affiliate companies, is actively working on them. Tenova, a supplier of equipment and technology for the steel industry, is assisting in the development of carbon capture equipment and hydrogen-based burners. Tecpetrol's Energy Transition Business Unit is collaborating in the development of renewable energy projects, carbon capture and storage facilities and green hydrogen infrastructure. Additionally, Tecpetrol has launched a venture capital initiative to foster the growth of start-ups with the aim at accelerating decarbonization opportunities.



CLIMATE CHANGE GOVERNANCE
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Based on the potential that Latin America holds in terms of nature-based solutions, Ternium is currently conducting pre-feasibility studies for its participation in projects that involve biomass production and utilization, as well as for the protection and reforestation efforts in affected areas.

One of the potential projects focuses on expanding mangrove canopies, as these ecosystems play a crucial role in mitigating global warming by absorbing significant amounts of CO2. This innovative approach aims to compensate for residual emissions in the long term, addressing climate change while benefiting both human well-being and biodiversity.

Collaborative Efforts Required to Tackle
Climate Change

Reducing carbon emissions is a critical long-term goal that requires significant changes at a global level.

Encouraging the widespread adoption of green energy and improving energy infrastructure are necessary to ensure a reliable supply for both industry and residential areas. Disruptive low-carbon technologies and carbon capture and storage solutions must be developed and made commercially available for the industry. Governments have a role to play in promoting emission intensity reduction and incentivizing national industries through initiatives like the Inflation Reduction Act (IRA) in the US. It is crucial to ensure a level-playing field for all actors and prevent carbon leakage between regions. The financial sector should support investment projects that contribute to mitigate climate change and create favorable market conditions for these initiatives to prosper.

Aware of the sizable challenges ahead, Ternium has already set strategic alliances along its supply chain while promoting joint efforts with several other stakeholders in order to achieve its decarbonization goals.

Ternium recognizes that minimizing its environmental footprint presents a chance to foster innovation and new technologies, while collaborating with partners across the value chain towards a sustainable future.
In this regard, in 2021 the company signed a memorandum of understanding (MoU) with Vale, Ternium’s main iron ore supplier, to jointly study the
use of iron ore briquettes at its blast furnaces, along with the economic feasibility of investing in an iron ore briquetting plant with Vale's technology at Ternium’s Brazil facility. Briquette technology enables the utilization of fines with lower iron content, thereby increasing efficiency in the utilization of natural resources and providing flexibility in Ternium’s iron ore supply scheme.

In this same line, in 2022, the company conducted successful pilot and industrial tests for the use of various types of charcoal derived from biomass and forestry as a substitute for mineral coal in the coking facilities at its steelmaking sites in Brazil and Argentina. Efforts are now underway to identify charcoals with sustainable certification.





SYNERGIC PARTNERSHIPS
The decarbonization of the value chain in the steel industry is of vital importance in order to achieve net-zero emissions. Collaborative efforts are critical to achieving a sustainable future. Ternium has already set strategic alliances along its supply chain while promoting joint efforts with several other stakeholders in order to achieve its decarbonization goals.

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TERNIUM & VALE
SIGNED MOU FOR TRYOUTS OF VALE'S BRIQUETTES AT TERNIUM’S BRAZIL FACILITY
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TERNIUM EXPLORES BIOMASS
AS METALLURGICAL COAL SUBSTITUTE WITH PARTNERS

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As part of its sustainable procurement practices, the company is working on gathering information about the emission intensity of Ternium’s raw material and slabs purchases. This initiative is expected to have a significant impact in the registration of CO2 emissions in our suppliers’ base while helping us improve our assessment of scope 3 emissions. As a result of the 2022 campaign and after reviewing the information gathered, we incorporated to Ternium' scope 3 inventory specific emissions data from suppliers representing 67% of the purchases of raw materials and steel.

Ternium also collaborates with small and medium-sized local suppliers, assisting them in improving their own assessment of their product's footprint while identifying opportunities to reduce emissions and achieve energy efficiency in their internal processes (For more information please refer to “Strengthening Our Value Chain” Chapter).

Institutional Support for Decarbonization

Ternium is an active member of the World Steel Association (worldsteel) and a signatory of worldsteel’s Sustainable Charter, reaffirming its commitment to worldsteel’s sustainability principles. Within worldsteel, Ternium participates in several initiatives to measure and reduce CO2 emissions (Climate Action program and Step Up program) and reports on worldsteel sustainability indicators. In recognition of the company’s support and contributions, worldsteel has distinguished Ternium as Sustainability Champion for five years in a row.

Over the past few years, the company has been actively involved in various global initiatives focused on identifying optimal pathways for decarbonizing the industry. One notable example is the Technical Working Group (TWG) of The Net-Zero Steel Pathway Methodology Project, in which the company participated during 2021. This private sector initiative aims at establishing a feasible decarbonization roadmap for the steel industry, considering available technologies and their proposed decarbonization alternatives. The current steel sector decarbonization approach (SDA) under the SBTi (Science Based Target Initiative) treats the sector as homogenous, assessing a company’s carbon intensity target against a single carbon budget for steel,
As part of Ternium's 2022 emissions assessment campaign, data from suppliers representing 67% of slab
and raw material purchases
were included in the company's GHG inventory.












without distinguishing between steel produced from iron ore (primary steel) or steel produced from scrap (secondary steel). The TWG report highlights the particularities of the industry and suggests common principles for a consistent assessment of the companies’ CO2 emission reduction targets, along with the contribution needed from the sector.

The company also promotes the definition of regulatory frameworks in the steel markets where it operates to ensure a level playing field between regions during the transition to carbon-free technologies. With that objective, Ternium maintains an active participation in national steel and industrial associations like Alacero in Latin America.


PROACTIVELY ASSESSING STRATEGY RESILIENCE
TO MITIGATE RISK

The company is currently undertaking comprehensive actions to move along with its decarbonization roadmap

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Expansion of the Pesquería Industrial Center, Mexico. Project announced with DRI-EAF technology prepared for CO2 capture and the use of green hydrogen.
aiming at meeting its 2030 target. The company is considering multiple scenarios in its strategy, including the International Energy Agency's Current Policy and Sustainable Development scenarios, which were published in October 2020, as well as the Nationally Determined Contributions (NDCs) of the countries where Ternium has steelmaking facilities. The company evaluates the commitments made by each country and leverages this information to develop an scenario for planning purposes. For example, Mexico has pledged to reduce emissions by accomplishing a 37.7% participation of renewable energy in the energy mix by 2030. Ternium’s Decarbonization Roadmap considers a 43% of participation of renewables at its Mexican steelmaking operations by 2030.

The company closely follows changes over time to the countries' pledges so it can adapt its roadmap to those objectives. For example, in March 2022 the Brazilian government confirmed its target to reduce by 37% its
emissions by 2025 and 50% by 2030, compared to 2005 levels. The government has called upon the steel sector to develop a GHG mitigation curve as a starting point for discussions on the potential design of ETS (Emissions Trading System) regulations. Ternium is actively collaborating with other industry members to craft this plan, considering the available technologies and necessary changes within the steel industry's supply chain. The objective is to establish a framework that supports both environmental sustainability and the competitiveness of the sector.

Along with this, Ternium has also taken into consideration various scenarios designed by third party experts, particularly with regard to climate-related physical risks. In 2022, the company completed a vulnerability analysis of 18 operational sites in Mexico, Argentina, Brazil, Guatemala, Colombia and the US, encompassing 100% of the company's crude steel production.

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Results of a third-party assessment conducted in 2021 and 2022 show that none of Ternium's main sites present
a 'very high' or 'high' physical risk index.






The analysis considered the exposure to five natural hazards: pluvial floods, tropical cyclones, landslides, wildfires and droughts, and was carried out by an independent consultant firm through models based on different scenarios, which included the Representatives Concentration Pathway (RCP) 4.5 Celsius degrees scenario (intermediate), and the RCP 8.5 Celsius degrees scenario (extreme) from the Intergovernmental Panel on Climate Change (IPCC). These analysis covered two timeframes: 2020 to 2039 and 2040 to 2059. The analysis concluded that Ternium's facilities are not vulnerable to acute risks, considering the level of exposure and mitigation measures implemented by the company within the defined scenarios and timeframe.


TERNIUM'S STRATEGIES FOR IDENTIFYING AND ASSESSING CLIMATE-RELATED RISKS

Under Ternium’s Risk Management Policy, climate- related risks are identified and evaluated at a local level with the participation of its environmental, industrial and planning departments. All detected risks are classified according to a risk matrix that considers economic impacts and the probability of occurrence. All risks are reviewed at least three times a year and the ones classified as significant, highly significant or critical are discussed in the Critical Risk Committee, which is chaired by the CEO.
During these meetings, each business unit presents their mitigation plans, which are then approved by the committee.

Ternium classifies climate-change risks into two categories: transitional risks and physical risks. The company regularly evaluates the impact of changes in GHG emission policies and the increasing climate regulatory requirements. As part of this process, Ternium assesses government initiatives aimed at reducing GHG emissions, such as the introduction of carbon taxes, carbon-pricing systems, the adoption of "cap-and-trade" regulations or other measures to control GHG emissions. While the current policies in force in the countries where Ternium has industrial facilities do not have a significant economic impact in the company, future regulatory changes could eventually increase Ternium’s operating costs.

For instance, the 2017 tax reform in Argentina introduced a tax on certain fossil fuels. Natural gas, considered the transitional fossil fuel to decarbonization, was excluded and metallurgical coal and petrochemical coke were exempted as long as they are used as part of an industrial process other than for energy generation. Similarly, Mexico approved carbon taxing rules applicable to fossil fuels in 2013 and set a zero tax on natural gas. Later, in 2019, the government presented a pilot program for an Emissions Trading System (ETS) that would set a cap on emissions and allow the trade of emission certificates. In addition, the Brazilian Congress has been discussing initiatives to introduce a carbon pricing mechanism on industrial processes and power generation facilities, which could result in incremental costs for Ternium’s steel production in Brazil.

The company also monitors the economic impact of natural disaster scenarios, such as hurricanes, cyclones, droughts, floods and fires or extreme weather conditions (physical risks). For example, in 2020 and 2021, iron ore supplied to the company’s operations in Argentina from Brazil’s mines in the Pantanal Region (Mato Grosso do Sul state), which are barged down the Paraguay and Paraná rivers, were disrupted as this waterway recorded very low levels. To avoid operational disruptions, the company worked on improving its management of iron ore inventories, including new river transportation strategies and the development of new supply agreements to secure alternative sources.

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Sometimes, in the face of unexpected and isolated events, production suffers interruptions. For example, during the first quarter of 2021, extreme weather conditions in the southern United States and northern Mexico disrupted the provision of natural gas and energy to the company’s operations in Mexico, negatively affecting steel production levels for a short period of time. As extreme weather events become more frequent, the company will continue strengthening the analysis of climate-related risks, their potential implications and the probability of their occurrence.
Ternium’s sustainable steel solutions: meeting
the demands of a changing world

Ternium is currently focused on developing a new product roadmap that aims to expand the company's offering of lightweight, durable, and advanced steel products suitable for low-carbon economy applications.

In the field of renewable energy, Ternium supplies galvanized steel to manufacturers of solar panel supporting racks in Mexico and Argentina.






TERNIUM´S STEELMAKING ROUTES
MAIN PRODUCTION
INPUTS
CRUDE STEEL
PRODUCTION (2022)
CRUDE STEEL
CAPACITY (2026)
1. Iron ore
2. Coking coal
3. Pulverized Injection Coal (PCI)
4. Natural Gas
BF
Blast furnace
BOF
Basic oxigen
furnace
CC
Slab continuous caster
63%55 %
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1. Iron ore pellets
2. Natural gas
3. Electricity
4. Scrap
DRI
Direct reduction
iron plant
EAF
Electric
arc furnace
CC
Slab and billet continuous caster
29%39 %
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1. Scrap
2. Electricity
EAF
Electric
arc furnace
CC
Billet continuous caster
8%%
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PIONEERING CARBON CAPTURE
FOR MORE THAN 20 YEARS

Ternium's Guerrero unit in Mexico incorporated direct reduced iron (DRI) technology back in 1998, which was exceptional at the time. Its Direct Reduction Plant revolutionized the industry with its cost-efficiency and environmentally conscious design.

Equipped with CO2 removal units that use amines technology, the facility captures and commercializes the CO2 generated during the reduction process as a co-product. This process helps to avoid emissions in other industries.

Since then, DRI technology was also successfully deployed in Ternium's facility in Puebla, Mexico.
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40%
INCREASE IN CO2 CAPTURE
AND USAGE IN MEXICO FROM 2017 TO 2022






Furthermore, the recently installed hot-rolling mill in Pesquería, Mexico, is equipped with advanced technology that enables the production of high-value-added steels that are suited for the manufacturing of electric vehicles, supporting the automotive industry’s efforts to increase EVs participation in automotive sales. In 2022, Ternium initiated efforts to develop key Electrical Vehicle components to foster the application of its high strength steels in this very dynamic segment.

For the construction sector, Ternium has designed a new family of sustainable coil-coated steels and insulating panels, combining eco-friendly components and energy-saving solutions.

In 2022, Ternium sold approximately $ 86 million worth of products that were linked to renewable energy projects, electric vehicles, or transportation solutions designed to achieve weight reduction or improved capacity. The company expects this figure to continue growing in the upcoming years.


TERNIUM’S CARBON FOOTPRINT: A STEP TOWARDS TRANSPARENCY AND ACCOUNTABILITY

In 2022, Ternium’s CO2 emission intensity rate (scopes 1 and 2), stood at 1.7 tons of CO2 per ton of crude steel production, relatively in line with previous years and with the average of the global steel industry according to worldsteel's figures.

In 2021, the company took additional steps towards decarbonization by increasing the carbon capture and usage capacity at its Guerrero and Puebla facilities in Mexico. In 2022, the company captured 261 thousand tons of CO2 from the process, which then were sold to third parties. This prevented emissions in industries such as beverage and chemical, and is equivalent to the annual CO2 output of 58 thousand gasoline-powered passenger vehicles as defined by the United States Environmental Protection Agency (EPA). The figure represents a 40% increase in carbon capture and usage compared to 2017.

The second phase of expansion of the CO2 capture and usage capacity at these facilities is under technical analysis. Its execution will ultimately depend on the expansion of demand for CO2 in the market. Given the positive experience in Mexico, studies for CO2 capture and usage at the company's facility in Brazil are currently under development.

The company is actively exploring projects aimed
at replacing coal in the production route of Argentina and Brazil. One of those projects consists in increasing the use of pulverized coal to improve the reduction process while obtaining economic advantages. To this end, the company installed a PCI Injection System in the blast furnace in Brazil in 2022.

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Solar Power Project: 1,012 panels to generate 90% of the energy required for our corporate building in Monterrey, Mexico.
We anticipate that our CO2 emission intensity rate will show more significant decreases after 2025, as our decarbonization projects are finalized and reach their full operational stage.

In addition to analyzing specific projects aimed at reducing CO2 emissions, the company has been working on improving the management systems for monitoring, reporting, and verifying greenhouse gas (GHG) emissions.

Ternium applies worldsteel's methodology and the GHG Protocol corporate inventory with an operational control approach to quantify GHG emissions. We have implemented monthly monitoring of CO2 emissions from the steel mill and we are actively working towards further enhancement by implementing the GHG Protocol at the production process line level. The improvements made in tracking and registration of CO2
have allowed for the successful verification of indicators, for the second consecutive year, by an external consultant.

Our next steps include conducting a materiality analysis of all scope 3 categories to quantify and include the relevant ones in our inventory. Currently, the company's scope 3 corporate inventory under GHG Protocol methodology includes purchases of goods and services (raw materials and steel), upstream and downstream transportation, and employee travel (only for Brazil).


THE POWER OF EFFICIENCY: TERNIUM’S LATEST ENERGY MANAGEMENT EFFORTS

Ternium is firmly committed to enhance its environmental and energy management system. The company operates with the goal of achieving a circular


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economy and minimizing CO2 emissions by efficiently
managing its energy supply.

Depending on the technology being used, Ternium power plants in Brazil and Argentina reutilize recovered residual gases from iron and steel production processes like Blast Furnace gas (BFg), Basic Oxygen Furnace gas (BOFg) and Coke Oven Gas (COg) and residual heat from coke making.

The power plant at our Rio de Janeiro facility supplies energy for the steelmaking process and sells 46% of the electricity generated to the Brazilian national grid. In addition, the company is reducing its natural gas consumption in Brazil by using biomethane obtained from solid urban waste. The fossil natural gas substitution rate with biomethane was approximately 6% in 2022, turning it into a flexible and renewable energy source.

In Mexico, Ternium relies on Techgen, a combined cycle power station owned in partnership with Tenaris and Tecpetrol, as its primary electricity supplier. Ternium contracts 78% of Techgen’s capacity of approximately 900 megawatts and sells unused electricity to the Mexican market. The utilization of electricity from Techgen represents a reduction in Ternium’s scope 2 emissions of approximately 7% compared to the utilization of electricity from the national grid. In addition in 2022 Ternium procured clean energy certificates equivalent to 14% of its total electricity consumption through Techgen.

In Argentina, the company uses process gases to produce most of the electricity required by the operation. This represents 56% of the total consumption. Self generated electricity is expected to increase once the wind farm in Argentina is fully operational in the second half of 2024 and replaces 65% of the electricity purchased from third parties.

Looking ahead, Ternium aims to achieve a target of 40% renewable energy in its energy mix by 2030.

Ternium's Commitment to Continuous Improvement

Energy efficiency plays a vital role in the decarbonization efforts as it helps to reduce energy consumption and minimize greenhouse gas emissions.
It also has economic benefits as it reduces energy costs and enhances overall productivity.

In 2014, the company launched a comprehensive energy efficiency program to identify and capitalize on opportunities for energy savings. Since that day, the energy efficiency program has expanded and it is yearly reviewed in light of the latest technology developments and the best market practices. In 2022, the company incorporated a new PCI injection system and a blast furnace automated expert operation system based on artificial intelligence in Brazil to improve the blast furnace operational performance.

In Argentina, Ternium initiated a technological update of motors in the descaler system of the hot strip mill at the San Nicolas facility by installing high-efficiency equipment. We are also in the process of replacing the steel ladle dryer-heaters in order to reduce the consumption of natural gas on the line, also improving safety conditions.

Our corporate building at the Universidad facility in Mexico has already achieved self-supply of 90% of its electricity needs through solar energy and the company has plans to install solar capacity in its service center in Apodaca in the last quarter of 2023.

Ternium’s top energy-consuming operations are in the process of certifying their energy management system under ISO 50001. At this stage, the Rio de Janeiro unit in Brazil, the steel shop and the hot rolling mill at the San Nicolás unit in Argentina, the Guerrero unit and the Pesquería unit in Mexico, have all completed the ISO 50001 certifications. Next steps include Puebla and Apodaca facilities in Mexico and the downstream facilities in Mexico as part of a more comprehensive plan to be deployed over the next five years.



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KEY FIGURES
EMISSION INTENSITY (SCOPES 1+2) (1)
TONS OF CO2 EMITTED PER TON OF CRUDE STEEL PRODUCED
chart-2821aa9c1f4245b8a5ba.jpg
ENERGY INTENSITY (2)
GIGAJOULES CONSUMED PER TON OF CRUDE STEEL PRODUCED
chart-c1d300c314ca4c0ca2ba.jpg

CO2 CAPTURE AND USAGE
THOUSAND TONS
chart-86e5a91e68b74576a59a.jpg

(1) The energy and emissions data presented herein are limited to Ternium's steelmaking facilities and are based on worldsteel's sectoral approach methodology. Carbon dioxide (CO2) emissions are the only greenhouse gas emissions reported, given the insignificant emission levels of other greenhouse gases within Ternium's processes.

Scope 1 emissions were calculated using Tier 3 emissions factors based on specific site measurements on the main raw materials performed by Ternium. CO2 captured and sold to other industries are considered as emissions avoided. Scope 2 emissions were estimated using location-based (Tier 2) and market-based (Tier 3) emission factors when applicable, but without accounting for clean energy certificates. If clean energy certificates were considered, it would result in a reduction of 1.12 million tons of CO2 and 0.11 tons of CO2 per ton of crude steel for scope 2.

(2) The energy intensity ratio and total energy consumption metrics account for all energy sources used, including fuels, electricity, and the energy required for feedstock production.

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MINIMIZING OUR
ENVIRONMENTAL FOOTPRINT
SUSTAINABLE DEVELOPMENT GOALS
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GOALS & ACTIONSKPIs
 
GOALS
 
_
_
_

_

_
_
_



 
Make an efficient use of resources
Minimize water use in water-stressed areas
Achieve circular economy and develop new markets for steelmaking co-products
Prevent pollution at the source, minimizing the impact of the company's operations on the environment
Preserve biodiversity within the company's area of influence
Incorporate environmental factors into all company decisions
Promote environmental stewardship within our industry and throughout our value chain, raising collective awareness among our employees and the communities in which we operate
$89.6
MILLION INVESTED IN
ENVIRONMENTAL PROJECTS
(2022)
100%
OF STEEL PRODUCED IN ISO 14.001 CERTIFIED FACILITIES
3.3 M3
WATER USED PER TON OF CRUDE STEEL AT MEXICAN FACILITIES
ACTIONS
_

_
_

_

_

_

_

_
Executing an environmental investment plan 2020-2030 of $608 million
Designing closed water systems in greenfield projects when feasible
Prioritizing the use of sewage water in water-stressed areas
Enhancing water treatment capacity and improving the quality of treatment by upgrading facility infrastructures
Implementing engineering solutions to minimized impact of production activities in the environment
Promoting the alternative use of co-products resulting from the steelmaking process
Reinforcing environmental monitoring and control systems, which include the installation of sensors to enable real-time data reporting Extending certification to our main facilities under ISO 14001 standard
99.4%
OF MATERIAL CONVERTED TO PRODUCTS & CO-PRODUCTS
(MATERIAL EFFICIENCY)

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ENVIRONMENTAL RESPONSIBILITY

Ternium considers environmental protection to be a core value, and as such, has implemented a corporate environmental and energy policy that establishes its principles and objectives, including the conservation of natural resources, the reduction of pollution and the proper waste management. The company strives to achieve the highest standards of environmental performance to ensure sustainable development and encourages its supply chain to follow the same principles.

The company’s commitment to environmental sustainability is supported by an environmental and energy management system that encompasses every production unit. The company conducts regular audits and certifications to update its environmental and energy management processes and to identify opportunities for improvement. Currently, Ternium’s


RESPONSIBLE OPERATIONS
IN WATER-STRESSED AREAS

Ternium prioritizes responsible water management in its operations, employing a site-specific strategy that considers local conditions.

We utilize advanced technologies to optimize water management across the entire cycle, from intake to discharge and prioritize the use of non-potable water for industrial purposes. This minimizes our ecological footprint and supports a sustainable water usage.
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49%
OF MEXICAN FACILITIES' WATER INTAKE WAS SOURCED FROM SEWAGE
IN 2022
steel production facilities are certified under ISO 14001, the environmental management standard.

To improve environmental performance, Ternium established a 10-year plan of environmental projects in 2020, which is updated annually. The current plan has a total budget of $470 million for the period 2023-2030.


WATER EFFICIENCY STRATEGIES

Ternium places a strong emphasis on responsible water management in its operations. The company has implemented a site-specific water management strategy that takes into account the unique characteristics of each location where it operates. Through continuous incorporation of cutting-edge technologies, Ternium aims to improve water management practices across the entire water cycle, from intake to discharge, in order to reduce its environmental impact and contribute to sustainable water usage.

Water availability is different in each location where Ternium operates. Based on the water risk atlas of the World Resource Institute (WRI), about 11% of Ternium’s total water withdrawal in the steel segment is located in areas of high water stress, mainly in Mexico. If we consider the water intake for cooling purposes in power plants, the exposure would come down to 2%.

Ternium carefully considers the proper use of water as a key resource when designing new facilities. The industrial center in Palmar de Varela, Colombia, inaugurated in February 2021, serves as a prime example of this commitment. The facility was designed with a 100% closed circuit system, meaning that the company only sources water from a third-party for replenishing purposes due to evaporation.

Over the years, Ternium has developed different strategies to minimize water usage at its Mexican steelmaking facilities, achieving a water use intensity rate of just 3.3 cubic meters per ton of crude steel produced in 2022. This figure is significantly lower than the average reported by a worldsteel study in 2011, which established an intake intensity of 28.6 m3 per ton of crude steel for a Blast Furnace based facility and 28.1 m3 per ton of crude steel in a facility with Electric Arc Furnace technology.


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The company has also consistently increased the use of third-party water, mostly sewage water from external wastewater treatment plants or directly
sourced from the city's sewage system. As a result, the participation of third-party water at our Mexican facilities’ water intake reached 49% in 2022 from 44% in 2018.

At present, the utilization rate of sewage water in the Pesquería facility is 94%. The upcoming capacity expansion project will also utilize sewage water instead of groundwater, resulting in an increase in the use of wastewater at Mexican facilities. This project will require an expansion of the current water treatment plant's capacity.


Water plays a significant role in Ternium’s production system, both in steam generation and in cooling machinery. In this regard, the company's efficient water management system ensures that the majority of the water used (94% in 2022) is cleaned, cooled, and safely returned to its source.

Water discharge management

The company permanently monitors water discharges
in compliance with local environmental regulations.
All facilities measure water quality by considering numerous physicochemical and bacteriological







MEXICO: SUPPORTING THE COMMUNITY DURING WATER SHORTAGE
In 2022, the state of Nuevo Leon in Mexico faced a severe water crisis due to high temperatures, minimal rainfall, and depleted water reserves. Ternium responded to this dire situation by launching several initiatives to support the affected communities.
Collaborating in industry-wide initiatives
The company temporarily ceded the concession of 8 water wells with an approximate capacity of 2.75 million cubic meters per year to the state. This represented 21% of the total water ceded by the local industry for citizen consumption.
Providing Water Relief
The company provided over 10,200 liters of potable water and 1,9 million liters of non-potable water for domestic use to the communities surrounding the facilities.

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10,200
LITERS OF POTABLE WATER
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MILLION LITERS OF NON-
POTABLE WATER PROVIDED
FOR DOMESTIC USE
Participating in local water infrastructure
The company participates in the "El Cuchillo II" aqueduct project by providing 95,000 tons of steel to produce pipes.

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95,000
TONS OF STEEL SOLD TO
PRODUCE PIPES
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8WATER WELLS
CEDED IN
CONCESSION

56. TERNIUM_SUSTAINABILITY REPORT 2022
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LiDAR (Light Detection and Ranging) technology. Currently undergoing testing at Ternium's San Nicolás unit in Argentina and the Rio de Janeiro unit in Brazil.
parameters. Over time, Ternium has integrated advanced technologies and monitoring systems to enhance the quality of water discharges while reducing their environmental impact.

In 2022, the company invested in improving the final treatment of the main plant effluents at its San Nicolas facility in Argentina through the construction of two sedimentation pools. The pools have a treatment capacity of 32,000 m3/h and include entry chambers to standardize the flow velocities of the incoming effluents, dredges for sediment extraction, and an oil skimmer system. An impermeable yard was also constructed to dehydrate the extracted sediments using geobags.
The company had also completed the construction of a treatment plant for the rain water from the pet coke yard. This plant, through a physicochemical process, triggers the sedimentation of solids that are later reused in the sintering process or sold to the cement industry, transforming this material into a useful input for both industries.

In Brazil, Ternium has optimized water management tools by implementing online dashboards to track water reuse. This allows for real-time decision-making, thus avoiding delays in the performance analysis. In this facility, the company has also incorporated a Water Resources Committee to review water usage at each stage of the production process.

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AIR QUALITY

Ternium is committed to minimize its impact in air quality. In 2021, the company initiated a comprehensive project at its Guerrero unit in Mexico, which includes the construction of a dome in the iron ore yard, silos for the collection and storage of DRI, a wet dust collector suction system, and cladding of the steel mill façade. These measures will significantly reduce dust emissions from materials handling and transportation. The project is scheduled to be completed by 2025.

The company is also advancing a project at its steel shop in the San Nicolás unit in Argentina to further enhance its environmental performance by increasing the dust collection capacity with the revamping of the entire collection system, vertical ducts and flow control systems. In addition, Ternium expects to incorporate in this facility cameras and monitoring systems to strengthen its environmental management and operational control.

The company is utilizing cutting-edge technology for real-time air quality monitoring. LiDAR (Light Detection and Ranging) technology is currently undergoing testing at the San Nicolás unit in Argentina and the Rio de Janeiro unit in Brazil. This technology uses laser beams to assess site particulate matter emissions and establish virtual monitoring stations. This enables the company to gather real-time information about air quality impact and make informed decisions about environmental management.


BUILDING A CIRCULAR ECONOMY: TERNIUM'S FOCUS ON MATERIAL EFFICIENCY AND RECYCLING

Steel is a material that holds immense potential for a sustainable future, thanks to its endless recyclability without any loss in quality or properties. All the steel scrap generated in Ternium’s facilities is recycled. The company also purchases steel scrap from either scrap-processing companies or scrap collecting firms.
LIDAR SYSTEM`S COMP0NENTS

1. LASER
The equipment emits short pulses of light energy that reach the elements present in the atmosphere within its area of influence.    

2. TELESCOPE
The optics capture the backscatter to be analyzed, coming from the deflection produced by the elements present in the atmosphere.

3. HEAD
This piece contains, in addition to the laser and the telescope, a detector that converts the captured radiation into electrical signals.

4. POSITIONING SYSTEM    
This motorized mechanical system allows the laser to point in a specific direction.

5. CONTROL UNIT
The electrical signal is processed by algorithms that interpret the distance and concentration of the detected elements.


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58. TERNIUM_SUSTAINABILITY REPORT 2022
CHAIRMAN´S LETTEROUR SUSTAINABILITY JOURNEY
In 2022, Ternium recycled 2.8 million tons of steel scrap to produce new steel, retaining all its properties.

The company is seriously committed to minimizing waste and maximizing material efficiency in its operations. We continuously develop and implement strategies to reduce the production of waste and maximize the use of co-products. In 2022, Ternium achieved a material efficiency rate of 99% in its steel operations, with 5.1 million tons of co-products being reused in the production process or sold to other industries.

Co-products mainly include blast furnace and steel shop slag, iron oxide and chemical substances. The use of Ternium’s co-products by other industries reduces their consumption of raw materials and energy, with a positive effect on carbon dioxide emissions and waste generation in the value chain as a whole.

In facilities with blast furnaces, the granulated slag is sold to the cement industry as a substitute for clinker. In 2022 the company sold 1.9 million tons of slag avoiding CO2 emissions of 1.1 million tons. Additionally, the slag generated in the steel shop is also used to consolidate roads and therefore avoiding the use of materials in other industries. As an example, during 2022, the company delivered over 360 thousand tons of recycled aggregate slag to pave the Santa Cruz industrial district main access roads in Rio de Janeiro, Brazil.

In Mexico, the dust generated by the electric-arc furnaces at its Guerrero and Puebla units, is transformed into Mix Rock® and other mixes, innovative co-product developed and registered by Ternium. These mixes and Mix Rock® enables the re-use of EAF dust and slag as a substitute for iron ore in the clinker production process in the cement industry. In 2022, Ternium sold 125 thousand tons of Mix Rock® from Guerrero and mixes from the Puebla and Churubusco units.

In addition, Ternium has sinter and briquetting
facilities that allow the recycling of different materials
captured by its air and water treatment equipment,
including iron ore fines, coal, lime and dolomite.

In the Blast Furnace route, significant amounts of processes gases are generated during the processing of metallurgical coal. In Argentina, Ternium utilizes these gases to produce chemical products such as tar and benzol, which are sold to third-parties.
Ternium meets customer demands with environmental product declarations (EPDs) for eight product families, offering transparency on steel products' environmental impact. EPDs include carbon footprint and materials used across the production processes, enabling informed decision-making.








Local governments play a vital role in promoting a circular economy by incentivizing the commercialization of co-products and scrap metal generated during the steel production process. One approach is for governments to start recognizing scrap as a raw material, rather than just considering it as waste. This would change the rules concerning waste disposal, thus fostering a more sustainable future and unlock the full potential of the circular economy.


LIFE CYCLE AND ENVIRONMENTAL PRODUCT DECLARATIONS

Ternium assesses the life cycle of its steel products and participates in worldsteel’s life cycle assessment (LCA) initiatives to help document and improve the steel product’s environmental footprint.

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Conserving Mangroves in Brazil: Ternium's Protection of 160 hectares (395 acres) in Sepetiba Bay, Rio de Janeiro
A steel LCA involves, among other indicators, a thorough inventory of the energy and materials utilized across the industry value chain, according to ISO 14040 and 14044 standards, to determine the greenhouse gas emissions of the products. Ternium’s LCA inventory reporting encompassed 92% of our crude steel production.

In response to customer demands for greater transparency on the environmental impact of steel products, Ternium has developed environmental product declarations (EPDs) for eight product families. These EPDs provide detailed information on the environmental impact of each product, including its carbon footprint and other relevant data. Customers can access this information on Ternium’s website. EPDs also help to achieve credits in certification schemes such as LEED (Leadership in Energy and Environmental Design). Our facility in Pesquería was certified under LEED in 2017.
PRESERVING BIODIVERSITY: TERNIUM'S COMMITMENT
TO ENVIRONMENTAL STEWARDSHIP

Sepetiba bay

Ternium’s Rio de Janeiro plant is situated near the Sepetiba bay coastline in Brazil. The company is committed to preserving the bay's flora and fauna,
with a particular focus on 160 hectares (395 acres)
of mangroves.

Ternium currently participates in a research project in collaboration with the Universidade Federal do Rio de Janeiro and the Instituto Boto Cinza. The study focuses on the boto cinza, a species of dolphin that plays a vital role in the ecosystem, and aims to monitor their health and behavior using an innovative tracking and tracing system.

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Biodiversity
Ternium aims to promote biodiversity conservation. In Argentina, it collaborates with the Rewilding Argentina project that has successfully reintroduced the endangered Yaguareté (jaguar) in the province of Corrientes, among other species and locations.

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This research has two primary objectives: population ecology and chemical ecology. In addition these studies provide insights, into the habitats of whales, helping authorities redefine transit zones to prevent collisions with vessels. The results of this research were presented at the XIII Congress of the Latin American Society of Specialists in Aquatic Mammals (SOLAMAC). The scientific research sponsored by Ternium is currently in the submission stage for publication in scientific journals.

Iberá wetlands

Ternium sponsors the projects of the Rewilding Argentina Foundation at the Iberá wetlands, a protected area located at the northeast of Argentina. These projects have been incorporated into National Geographic Society’s Last Wild Places initiative. They seek to reintroduce in this area species that are considered extinct or endangered, such as the giant otter and the yaguareté, a kind of jaguar.

In 2022, following the devastating fires that occurred in this area during an extreme drought spell, Ternium, Tenaris and other members of the Techint Group donated materials to help with efforts to recover the local ecosystem. The donations included 53 tons of Ternium’s steel products (including sheets, profiles, and structural tubes) and machinery such as tractors to replace the perimeter fencing destroyed in the blaze, vital for keeping livestock separate from wildlife.

Expanding green areas in Ternium's facilities

In line with its commitment to environmental sustainability, Ternium has been actively engaged in reforestation projects over the last five years.

The company's efforts have focused on mining sites from Las Encinas in the Mexican states of Michoacán and Jalisco to compensate for the impact of the extractive activity in the area. In 2022, we planted approximately 136 thousand individuals of 29 native species as part of this reforestation program.
REFORESTATION AT CHIPINQUE ECOLOGICAL PARK IN MEXICO
 
In 2022, Ternium collaborated with the Seeds of Hope program at Chipinque Ecological Park in Nuevo León, Mexico. Through direct contributions and the Volunteers in Action program, which engaged the company's staff and their families, Ternium participated in reforesting areas impacted by fires, landslides, and the increasing presence of exotic species.

Ternium's contribution allowed the park rangers and the organization to plant over 1,400 native pine trees in the campaign.
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 +200
TREES PLANTED BY TERNIUM EMPLOYEES AT CHIPINQUE PARK




TERNIUM'S BIODIVERSITY INITIATIVES AIM TO MITIGATE THE COMPANY'S IMPACT ON THE ENVIRONMENT

Ternium takes proactive measures to protect local biodiversity before building new facilities. The company conducts extensive field work to identify ecological connectivity areas and ensures conservation in its steel and mining operations. Ternium also implements continuous monitoring and control programs in areas of conservation, rescuing wildlife and installing gates for reptiles, amphibians, and small mammals to connect habitats.

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KEY FIGURES
INVESTMENTS IN ENVIRONMENT PROJECTS
$ MILLION
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PARTICULATE MATTER EMISSIONS(*)
KG/TON CRUDE STEEL
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WATER MANAGEMENT AT MEXICAN FACILITIES
MILLION CUBIC METERS
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CO-PRODUCTS REUSED AND SOLD TO THIRD PARTIES(*)
MILLION TONS
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(*)    The information presented corresponds to Ternium’s steelmaking sites. For more information, please refer to the notes on pages 152 and 153.

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ENVIRONMENTAL AND ENERGY POLICY






















Ternium, an integrated steel company, whose processes range from mining operations to the manufacture
of finished steel products, defines in this Policy its commitment to environmental protection and its goal of achieving excellence in environmental and energy performance throughout its operations.
 
This Policy applies to Ternium and its subsidiaries. It will be actively disseminated to ensure compliance. The company believes that the sustainable development of its operations requires engagement through open dialogue with its employees, suppliers, contractors, customers and communities.

Caring for the environment is a core value, and establishes the following principles:
 
Environmental protection and energy efficiency is a responsibility of Ternium's personnel, as well as its suppliers and contractors.
Pollution must be prevented at the source, controlling the significant environmental aspects of our operations and minimizing their impacts and risks.
Compliance with the applicable legislation and voluntary agreements in relation to environmental protection and efficient energy consumption.
Promotion of continuous improvement in environmental and energy performance and management systems to achieve the established objectives and targets.
Integration of environmental and energy components into all company management processes.
Planning and executing decarbonization roadmaps with the ambition to achieve carbon neutrality of our products and operations, according to technological feasibility and local market conditions.
Using natural resources efficiently to contribute to circular economy.
Minimizing air emissions at the sites where we operate, optimizing the use of water, and maximizing its reuse.
Protecting biodiversity in areas where we operate and compensate the impacts where and when feasible.
Application of life cycle perspective and risk management in our continuous improvement processes, when feasible.
Promoting renewable energy generation and use, as well as the application of energy-efficient products, technologies and services, and the implementation of projects designed to improve energy and environmental performance, where significant.
Encourage the purchase of sustainable and energy-efficient products, technologies and services.
Promotion of employee training and awareness in relation to environmental protection and responsible energy use.

The company must provide the information, means and resources to enable compliance with this Policy, as well as with the objectives and goals established, thus supporting sustainability throughout operations, considering the context in which it operates.

All management levels are primarily responsible and accountable for environmental protection and energy consumption in their areas.

July 2023
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Máximo Vedoya
CEO Ternium

64. TERNIUM_SUSTAINABILITY REPORT 2022
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IMPROVING SAFETY
PERFORMANCE
SUSTAINABLE DEVELOPMENT GOALS
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GOALS & ACTIONSKPIs
 
GOALS
 
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Promote a culture where safety is considered everyone's responsibility
Strengthen the company’s positioning as a global referent in process safety within the steel industry
Ensure compliance with all relevant occupational health and safety regulations
Achieve a 50% reduction in the IFR and LTIFR by 2025, compared to 2020
Assess on a regular basis risks and implement appropriate preventive measures
Implement ergonomics practices and prevent hygiene-related injuries
Shorten emergency response times and strengthen contingency plans
Foster active participation and collaboration of all employees in the company’s safety initiatives
Extend best practices in Safety to company contractors
$74
MILLION INVESTED
IN HEALTH AND SAFETY PROJECTS (2022)
18%
REDUCTION OF INJURIES
FREQUENCY RATE (IFR) FROM 2020
25%
REDUCTION OF LOST
TIME INJURIES FREQUENCY RATE (LTIFR) FROM 2020


ACTIONS
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Certifying our main facilities under ISO 45001
Conducting planned and random recurrent audits
Introducing preventive tools such as “task rejection”
Summing up an In-house development of a High-Risk-Task Certification Program in collaboration with Ternium University
Improving employee training and safety awareness
Developing a comprehensive five-year program on process safety, ensuring an integrated approach to risk management within the company
Implementing regular and recurrent communication on safety topics from management, including events such as Safety Day
Developing the Safe Supplier program
Participating in industry-wide health and safety initiatives such as worldsteel's Safety Day
91%
OF EMPLOYEES AND
CONTRACTORS OPERATE ON SITES CERTIFIED UNDER ISO 45001
 +195
THOUSAND OCCUPATIONAL HEALTH AND SAFETY AUDITS (2022)

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SAFETY AS OUR NUMBER ONE CONCERN

The safety and well-being of Ternium’s employees are of paramount importance and serve as key drivers for the organization's long-term sustainability. Ternium endeavors to establish and maintain a safety culture that is dedicated to preserving the well-being of its employees. With this principle in mind, safety conditions are the primary consideration for any individual when initiating and carrying out their activities. Moreover, managers hold the responsibility for ensuring the occupational health and safety of all individuals working within their assigned areas.


FOSTERING A CULTURE OF PROCESS SAFETY

Process safety holds vital importance in the steel industry, as it plays a c