Latin America returns to pre-pandemic steel production levels

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The rolled products manufacture increased by 6% compared to the first quarter of 2020, although imports represent 35% of the regional market

Alacero – São Paulo, May 21, 2021. The steel market in Latin America follows its regularization process in which, on the one hand, the production of rolled steel evolves favorably in view of the demand recovery; and, on the other hand, imports continue to pose a risk to steel companies’ production and performance.

The momentum of steel demand in the region continues to favor the regularization of steel production, in which the accumulated volume of rolled steel until March was 13.46 million tons (Mt), 6% higher than the same period of 2020, and 4.1% above the level of the same period in 2019.

In the monthly comparison, there was an increase of 11.5% compared to March 2020 and 13.1% in February 2021, led by Mexico (33.1%). The results were the same since April 2018, when there was no pandemic. Seamless tubes stood out with a production increase of 24.2% (96.7 thousand ton.), followed by long tubes, with an increase of 16.7% (2.45 Mt), and flat tubes, whose production increased 8.9% (2.16 Mt).

The consumption of laminated products, especially in the construction and manufacturing sectors of the three main Latin American economies (Mexico, Brazil, and Argentina), was reflected in increases of 2.7% and 13.2% compared to 2019 and 2020, respectively, totaling 5.58 Mt.

In February, imports registered a 13.3% increase compared to the same month of 2020 but fell by 7.4% compared to last January; even so, they continued to represent 35% of regional consumption. The current month of May could be a possible point of imports resumption, aiming to reach the levels of previous years. The situation should be closely monitored by governments to avoid a sudden growth affecting regional production.

Regarding exports, the region registered a reduction due to the recovery of local demand. The number of February was similar to that of January (-0.5%) and 22.9% lower than that of February 2020. The trade balance decreased by 9.7% compared to the previous month, with a negative balance of 1.4356 million tons.

"It is important to pay attention to the recovery of local production levels to supply demand, since it represents the fastest way to regularize the steel market situation. The expectation is that production will continue on a positive path as regional consumption consolidates and the trade deficit is under control in the second half of the year, " said Francisco Leal, Alacero’s Director General.

On the other hand, information from the OECD Steel Committee confirms once again that the global steel production capacity problem is still present, and that Latin America is not part of this problem. According to the committee, "the world’s raw steel production capacity increased by 38.1 Mt in 2020, or 1.6%, despite extremely poor market conditions. Over the past two years, global capacity has grown at a total of 74.2 Mt, with Asia and the Middle East accounting for almost all of this increase".

Finally, there are major challenges to continuous economic reactivation in Latin America. Among the main ones are the start-up of plants and suspended projects, the economic and financial support to combat the effects of COVID-19, the reduction of high unemployment rates, the strengthening of public health systems, the encouragement of national and foreign investments, political stability, and respect for the rule of law. It is important that countries focus their efforts on overcoming these issues so that they can consolidate the ongoing recovery.