Latin
America registered its lowest commercial rolled steel deficit in 16
months, although there is a cumulative deficit of 2.0 Mt in rolled steel
production compared to the first seven months of 2018. The share of
imports in regional consumption closed the semester in 36%, after three
consecutive months in 37%, same percentage seen between January-June 2018.
The deficit registered in January-June 2019 was 6.94 Mt, with 10 thousand
tons less than January-June from the previous year (6.95 Mt).
In addition to the decrease in the
share of imports in real consumption, Latin American consumption itself
has been reduced, especially for rolled products. This factor, combined
with political uncertainty and economic slowdown, represents one of the
main elements that drive the low activity of the steel industry in Latin
America.
In this scenario, with the worst
indicator since February, steel consumption in Latin America fell 11.75%
in June compared to the same month of 2018, 7% less than in May 2019 and
3% in the accumulated compared to the first half of 2018. The result was
4% lower than the average of the first 5 months of the year, and the
countries that led half of this regional decline in June were, precisely,
Mexico and Argentina. Both decreased their steel consumption by 10%
compared to May, by 5.8% and 14.7%, respectively, compared to the same
month of 2018. Regional production of crude steel and rolled steel until
June fell 5% and 6%, respectively, in the same comparison to the first six
months of the previous year.
Imports: lowest index
since February
Latin American imports of rolled steel
registered their lowest rate since February 2018 (1,694 Mt), reaching
1,699 Mt in June. The region fell its imports by 17.5% between May and
June 2019, presenting a 2% decrease compared to January-June 2018. The
largest falls were observed in Mexico (180 thousand tons) and Brazil (60
thousand tons), totaling a fall of 240 thousand tons in rolled steel
imports. The share of imports over consumption totaled 36% in the year,
compared to 35% was observed in the second quarter of 2019.
Exports continue to fall
Rolled steel exports in the region
fell 9% from May to June, and registered a 6% decrease in the accumulated
of 2019. Almost half of this decrease was represented by Brazil (46%),
which exported 45 thousand tons less compared to last May. Argentina
represents the second largest fall (28%), which corresponds to 27 thousand
tons.
Trade balance indicates
growth opportunity
Imports of rolled products from Latin
America have experienced a fall almost four times greater than the
contraction seen in exports, and the deficit reduction has been the lowest
since February 2018. Brazil and Argentina were the only ones to reach a
positive balance 1.2 Mt and 124 thousand tons, respectively, showing a
large gap in investments in manufacturing infrastructure to build its
economic recovery. Mexico, with a negative balance of 3.5 Mt, represents
the largest regional deficit (50% of the Latin American total), which is
accompanied by decreases in production.
“This situation shows that the Latin
American economy has an opportunity there to grow in consumption by
stimulating domestic production, with the aim of supplying regional
demand. Together with the decreases in consumption, declines in production
point to a dependence on US trade agreements with China and others such as
the European Union, and at the same time they are signs of
deindustrialization and loss of competitiveness, ” says Francisco Leal,
General Director of Alacero.
Worst production of crude
steel in 31 months, plus positive outlook for rolled steel
In July, Latin American crude steel
production recorded its worst index since December 2016, declining 5% not
only with respect to the previous month but also in the year. The fall was
largely driven by the cut of 373 thousand tons in the production of
Brazil, which saw its index reach a record low. Compared to July 2018, the
fall in Latin American production was 15%.
Rolled steel production in July was
already 0.4% higher than the average of the first semester, indicating a
slightly positive outlook for the second semester, but 6% lower so far
this year. Compared to 2018, Mexico maintains a 69% share of the regional
deficit, registering in July a result 2% below the average of the first
semester. The country represents 20% of the 5% drop in Latin American
rolled steel production in July compared to the same period last year. |