Steel production in Latin America continues to decline

by Hans Diederichs

In the midst of the deepest global and regional economic crisis in history, the Latin American steel industry has been registering its negative effects. In various countries, companies have had to reduce or stop their production while other industries adapted to a new reality.

Mexico´s GDP contracted 2.4% in the first quarter compared to the same period last year, the steepest decline since the third quarter of 2009. Much of this is due to the 3.8% reduction in industrial and construction activities, in addition to the poor performance of the automotive industry. Mexican automotive production experienced an 8.5% drop in its production compared to the same quarter of 2019, and in its exports as well (-7%).

Brazilian industrial activity fell 9.1% in March, compared to February, showing a strong impact of the pandemic and measures of social isolation on the sector and on economic activity. The 2.6% drop in the first quarter of 2020, compared to the previous three months, was the sharpest downturn since the second quarter of 2018.

In Argentina, manufacturing activity contracted 0.9% in March compared to February, and fell 6.4% compared to the same month last year. Automotive and cement industries halted production.

In February, the apparent consumption of the region experienced a 2.5% reduction compared to the same month last year, in addition to a cumulative drop of 2%. In relation to January, the decrease was 7%. Argentina and Mexico are among the most affected countries. With this, our projection for the apparent consumption of steel so far is a decrease of 13.8%, about 8 million tons less, down to a total of 55.4 million tons, according to the information received from each country so far.

"Parallel to this scenario, we see a rapid recovery in the Chinese steel industry and the continued risk it presents due to its overcapacity, where in the face of the sharp drop in world markets it will continue seeking to export its production to Latin America, which could make the recovery of the region even more difficult ” said Francisco Leal, CEO of Alacero.

An unexpected 3.5% rise in China's exports and a 14.2% drop in imports in April compared to the same month the previous year contributed to a global trade surplus of US$ 45.34 billion, way above the US, with its US$ 19.9 billion registered in March.

Falling production and exports

Raw steel production fell 8% in the first quarter, while rolled products decreased 3% in the period. The more serious effects of the pandemic began to be seen in Argentina in March with a reduction of 27% compared to the same month last year. The fall in March corresponds to a third of the month, due to the quarantine in place since March 20.

Exports, meanwhile, continue to reflect the weak world steel demand: they fell 15% in the first two months of the year.

Last but not least, we should point out that the steel industry is actively collaborating to support the strengthening of the region's health systems by building new treatment centers for Covid-19, expanding community hospitals and providing special funds to support communities. The collaboration of the steel industry is essential for a large number of value chains that are vital for society at the moment, such as oxygen supply, transport and infrastructure, as well as food storage, disinfectant products, household appliances. and many others that are essential to cope with the crisis and achieve faster recovery of the economy.

Source: Alacero                                Graphic: Fotolia

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