Increased steel production is crucial for Latin America's recovery

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The rapid response of the industry was able to accompany a 39% increase in steel consumption recorded since April

Alacero - São Paulo, Brazil, January 12th, 2021. 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 totaled 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 140 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".

About Alacero

Alacero - Latin American Steel Association - is the non-profit civil entity that brings together the steel value chain in Latin America to promote the values of regional integration, technological innovation, excellence in human resources, safety at work, corporate responsibility and socio-environmental sustainability. Founded in 1959, it is made up of more than 60 producing and related companies whose production is close to 60 million tons per year. Alacero is recognized as a Special Consultant Body by the United Nations.

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