Increased steel production is crucial for Latin America's recovery

The steel industry has been fundamental to the recovery of Latin America in the context of  the  pandemic,  showing  flexibility  in  its  operation  and  focused  on  meeting  local  demand.  The  production  of  crude  steel totaled 5.294 million tons (Mt) in November, the best month in 2020. This happened in almost all countries in the region,  with  special  emphasis  on  Brazil,  which  led  the  resumption.  During  the  period,  Blast  Furnace  production  grew  8.4% compared to October, reaching 2.766 Mt with a restart of equipment in Brazil, while Electric Furnace production remained stable, reaching 2.528 Mt. In terms of rolled products, the production of seamless tubes reached 82.1 thousand tons in November, an increase of 9.7% compared to the previous month, driven by the increase in activity in the oil and gas sector. The industry is focused on meeting local demand, as shown by the 30.3% year-on-year drop in exports in October, which totalled 0.586 Mt. In the month, imports registered a 10.8% increase over September; its share in consumption was 28% in  October,  below  the  level  of  34%  between  January  and  September  2020.  The  accumulated  deficit  between  January  and  October  was  17.2%  lower  than  that  recorded  in  the  same  period  in  2019,  a  significant  decrease  so  that  regional  consumption can grow again with the trade deficit under control. Apparent consumption of rolled products was 5.404 Mt, the best for the year (see graph).China continues to be an important reference in the current steel industry juncture due to its relative weight in production, demand and trade of raw materials. According to worldsteel, China's steel production grew by 8% year-on-year in November, and by 5.5% between January and October 2020 compared to the same period in 2019. To do so, it demanded record iron ore imports from the world, especially from Brazil, which raised the price of the input to levels of 14 USD/t, above the values registered in the last 5 years. A similar situation is seen in other siderurgical inputs such as Aluminum and Zinc. But  it  is  also  an  issue  of  concern  for  its  growing  Chinese  investment  in  Latin  American  countries,  which  according  to  Bloomberg, was $7.7 billion in 2020 more than in Europe and North America combined. "This process causes a greater dependency that can become a risk factor due to their business practices, state-owned companies, deindustrialization and  job  losses,"  said  Francisco  Leal,  Alacero's  General  Director.  "The  phase  of  regionalization  and  the  disintegration  of  value chains in the world, accentuated by the trade war between China and the United States, opens an opportunity for the countries of the region to attract companies that seek to relocate affected by this phenomenon. To achieve this, Latin America  needs  to  create  conditions,  such  as  access  to  technology,  infrastructure,  administrative  simplification,  quality  technical education, institutional certainty and respect for the rule of law".

Source and graphic: Alacero