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Latin American steel industry remains stable

The expectation of concretion of the Brexit, the entrance of Brazil in the OECD and Colombia in just a step of following the same way, are factors that are transforming the global commerce and the geopolitical dynamics. In the midst of the threat represented by the commercial dispute between the United States and China and the crisis in Venezuela, the main economies of Latin America are going through unique moments in their histories. Argentina due to an economic crisis, price freezes and rate increases, Brazil with the expectation of the financial market before pension reform, and Mexico towards a scenario of deceleration and readjustment in its projections that shows greater uncertainty.

The projection for industrial production for the year decreased in most of Latin America and the Caribbean countries in April, and the expectation regarding consumer prices in the region also declined in most of the countries, except in Brazil and Argentina. Although the region’s steel market during January-February 2019 showed a 3 percent drop in the consumption of finished steel compared to January-February 2018, the regional production of crude and finished steel in March fell by 11% and 8%, respectively compared to March 2018, showing precisely global and regional economic uncertainties.

Although the region decreased its imports by 6% between January and February 2019, it was identified a 2% increase compared to January-February 2018. The share of imports in regional consumption also increased: regional consumption is now supplied in 36% by such imports, as opposed to 34% in January-February 2018. The deficit recorded in January-February 2019 was 2.1 Mt, which represents 61 thousand tons more than January-February of the previous year (2.0 Mt).

Production of crude and finished steel grows regarding February
Despite negativa oscillations in the same period of 2018, which came by the variation in consumption and market uncertainties, the overall production of crude and finished steel grew 3% and 12%, respectively, in March compared to Februar.

Crude Steel. Latin America had a production of 5.2 Mt of crude steel in February, 11% lower than that registered in the same period of 2018 (5.8 Mt). Considering the accumulated in 2019, it was produced 10.3 Mt, 2% less than ENE-MAR 2018 (16.3 Mt). In the year, Brazil is the main producer with 8.3 Mt, representing 54% of the regional total. Finished steel. It was produced 4.5 Mt of finished steel in March, 8% less than the same period of 2018. In the accumulated of the year it was registered 12.7 Mt, representing a fall of 7% compared to the first 3 months of 2018 (13, 6 Mt). The main producers in the year are Brazil 5.6 Mt (44% of the Latin American total) and Mexico with 4.5 Mt (36% of the Latin American total).

Trade balance faces fall in February
Considering the last year, from April 2018 to April 2019, there was a considerable fell of the GDPs in Latin America, with the exception of Brazil, Argentina and Chile. In this period, the gross fixed investment also decreased, although Chile and Colombia recorded progress. Industrial production grew, however, Mexico, Peru and Venezuela could not follow the same pace. Consumer prices also saw increases in most of the region, except in Mexico and Argentina.

Imports. In February, 1.8 Mt of finished steel were imported, 8% more than in February 2018 (1.7 Mt). In the cumulative of January-February 2019, Latin America imported 3.8 Mt of finished steel, 2% more than the imported in the same period of 2018 (3.7 Mt). Of this total, 70% correspond to flat products (2.6 Mt), 27% to long products (1.0 Mt) and 3% to seamless tubes (123 thousand t). Currently, finished steel imports represent 36% of the region’s consumption, which brings with it disincentives for the local industry, commercial frictions and puts employment sources at risk.

Exports. In February, 761 thousand tons of finished steel were exported, 10% less than in February 2018 (843 thousand tons). In the cumulative January-February, Latin American finished steel exports were 1.68 Mt, 1% more than in JanuaryFebruary 2018 (1.67 Mt) and 10% less compared to February 2018 (843 thousand tons). Of this total, 45% correspond to flat products (756 thousand t), 44.7% to long products (750 thousand t) and 10.3% to seamless tubes (173 thousand t).

Trade Deficit. In February 2019, the region registered a trade deficit by the volume of 1.06 Mt of finished steel. This imbalance is 25% higher than in February 2018 (0.85 Mt), and 3% higher than i nJanuary 2019 (1.03 Mt).

Brazil is the only country that maintains a surplus in its finished steel trade in January-February (594 thousand t). Conversely, the largest deficit was recorded in Mexico (-1.1 Mt). It was followed by Colombia (-362 thousand t), Peru (-316 thousand t) and Chile (-273 thousand t). The evolution of the trade flow is presented in Graph 02.

Source: Alacero

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