Latin America steel consumption falls 5% in 2019

by Hans Diederichs

The performance of steel consumption in Latin America in 2019 registered a 5% decrease, totalling 64 million tons. This result is a serious symptom of worsening deindustrialization process, which has been present for decades and can impact the stability of 260,000 direct jobs in the sector. The lower steel consumption in the region reflects a significant economic contraction of Latin American countries, particularly of the three main economies: Mexico, Argentina and Brazil, which account for 87% of the reduction. Among the main reasons for this situation are the global economic slowdown, lower commodities prices, US trade disputes with its partners, the decrease of world trade and political uncertainties and their effects on investment facing these countries and their neighbours in Latin America. Comparing the consumption trend in previous years, a gradual fall is seen from 2014, when consumption reached its highest level (72.1 Mt). This fall represents a setback compared to the initial estimate of almost 5 million tons. “We note with concern that a result of this type makes the situation - reflected in Alacero studies' - worse in what refers to the deindustrialization process we have been suffering. And we are just in time to update this study for all of Latin America” Francisco Leal, director of Alacero, comments. According to Professor Germano Mendes de Paula - Alacero studies' coordinator, professor of economics at the Federal University of Uberlândia (Minas Gerais, Brazil) and an expert in the steel industry, "unemployment is an effect of the gradual process that has entered our region since the middle of the century's first decade, which we call deindustrialization", he says. According to Mendes de Paula, the industry explained 30% of Latin America's GDP in 2000, but currently it only corresponds to 15%.“Steel consumption reflects industrial dynamism. All industries consume steel: construction, automotive, machinery and equipment, packaging, agriculture etc. The fall or low growth in steel consumption is more severe in emerging countries, as there, since they still need to import more capital goods than industrialized countries". In 2020 the initial expectation in Latin America is a 2.8% growth in steel consumption, which is expected to reach 66 million tons. The projection is influenced by Brazil, the main economy of the region, which has a favourable outlook for this year, due to the economic reforms that have been implemented. This estimate may change depending on the economic effects from the coronavirus, which has caused financial and economic volatility; that in turn has resulted in downward revisions of the economic forecasts available at the beginning of 2020.

Source and graphic: Alacero

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