Steel production reaches pre-pandemic levels

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The industry recovers but is far from stable operating and financial conditions

Alacero - São Paulo, Brazil, November 18, 2020. The economic recovery in Latin American countries, has been very varied, but something in common is the resilience of the steel-consuming sectors, which, as an essential material, is not only present in the recovery, but it is one of its engines of growth.  In this context, steel production reached pre-pandemic levels, following a strong recovery in consumption in all sectors, as well as civil and automotive construction, particularly in Argentina and Mexico

Although the result of crude steel production in September, totaling 4,686 million tons (Mt), represents a decrease of 2.5% in relation to August, the decrease was only 0.2% in relation to the value registered in the same period of 2019. During this period, the production of blast furnaces decreased 7.1% (2,408 Mt) in relation to August, while the production of electric furnaces reached 2,278 Mt, a total of 2.9% higher.

In rolled products, September production increased by 4.6% compared to the result of August, largely due to the positive performance in Brazil, Mexico, and Peru. The advance, however, was not enough to contain the 6.5% inter-annual decline. The production of seamless tubes grew 7.3%, followed by an increase of 6.7% in flat and 2.8% in long products.

In August, steel consumption in Latin America grew 5.3% in relation to July, mainly due to the performance of Mexico, Chile, and Argentina, which registered growths of 10.9%, 19.8%, and 9.5%, respectively. Flat products accounted for 47.3% of the recovery, long products for 43.2%, and seamless tubes for 9.5%. Because of the pandemic, the reduction in inventories to preserve cash flow was a direct consequence for many steel producers, due to the lack of a horizon for the market resumption.

However, with the sudden increase in demand, value chains need to normalize, reorganize, and have time to adjust. "The recovery in the countries of the region has been very varied, which can lead to an uneven return to normality and requires predictability, without panic, on the part of the consumer sectors so that steelworks can resume their operational levels," said Francisco Leal, Director General from Alacero.

In August, the 37 thousand tons imported in relation to the previous month and 58 thousand tons less in exports, caused the deficit to increase from 746 thousand tons in July to 841 thousand tons in August. However, in the year, after an accumulated decline in the trade deficit of 15.7% to date, imports fell by 2,710 Mt and exports by 1,068 Mt. Although a moderate decline, the low in exports indicates a reorientation of the industry for local consumption and the normalization of stocks.

Despite the relative improvement in the steel market, the industry is working with 60% of the installed capacity, above the 45% registered in April, but far from the 80-85% needed to work in better operating and financial conditions.

The current situation indicates that we must be aware of the possible wave of imports that can arrive in unfair trade conditions and cause distortions in the gradual recovery of demand.

The short-term challenge is to expect better conditions so that the entire value chain can resume its full activities. "This recovery indicates that we are closer than ever to the opportunity to re-industrialize the region, integrating new value chains that are geographically closer to raw materials and markets", added Leal. ••

 

About Alacero

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

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