Steel production regaining growth momentum

After being affected by the pandemic, Latin America shows signs of a gradual recovery. The  steelmaking  industry  in  the  region  reflects  this  trend,  restarting  furnaces  and  expanding  steelmaking  operations.  Until now, in some countries, the recovery has been V shaped, even though it is still far from returning to the levels prior to the COVID-19 outbreak.

In this scenario, the numbers related to raw steel production in August maintained a positive trend, reaching a total of 4.807 million tons (Mt), which represents an increase of 7.9% when compared to the previous month (July 2020).

Despite the production increase reported in August, driven by Brazil, Mexico and Argentina, the overall result was 2.4% below that of August 2019. As for rolled products, the production of long steel products grew 9.5% that month, and flat steel products 15.9%. However, the production of seamless tubes is still in a slump. Even with production 17.9% higher than the previous month, it was still 63% lower than in August last year.

Latin American steel consumption grew 2.9% in July when compared to the previous month, mainly due to the performance of Argentina, Colombia, Mexico and Brazil, the latter reporting its best month this year. However, consumption fell 19.7% compared to July 2019 and dropped 15.4% between January and July compared to the previous year. The  smaller  flow  of  imports  has  contributed  to  an  improved  trade  balance,  showing  the  lowest  deficit  since  October  2011.  “To  keep  up  to  date  with  the  increase  in  demand,  the  industry  is  making  a  comeback  with  a  larger  production,  restarting blast furnaces and increasing steel production” said Francisco Leal, Alacero’s general-director.

The disruption of global chains has been intensified by commercial disputes

With the US government’s implementation of a more restrictive policy because of the commercial tensions with China, and the higher costs of production, the fragmentation process of the global value chains has been accelerated due to reshoring. In view of this scenario, we reaffirm that it is the current mission of the governments to promote their com-petitiveness,  institutions,  and  infrastructure  to  attract  investments  at  such  a  critical  moment,  when  opportunities  are  opening up for Latin American countries.

In this context, Mexico is a logical option of nearshoring due to its proximity to the US market, and the existence of the T-MEC with the US and Canada. Colombia could also benefit from its favorable time zone and the prospect of a medium range economic improvement, which could also occur with other countries in the region.

To take advantage of the region’s benefits and development opportunities it is necessary for the governments to stimulate the interest of domestic and foreign investors through strategies of promotion, incentives, economic stability and respect for the rule of law.

Source and graphic: Alacero