The global slowdown in economic trade and activity since the beginning of 2018 made the global steel market return to conditions similar to 2016. With the downward trend in demand for steel worldwide, the expectation is that will capacity grow again in non-OECD countries, especially in China, and that the consumption of crude steel enters a plateau period until 2026. Latin America is the region with the lowest economic growth, and although the circumstances are different in each country, uncertainties predominate and the issue of economic inequality stands out.

Against the backdrop, the production of crude steel in October was 14% lower than the same month of 2018, totaling 5,674 Mt. The accumulated of the year until October was 8% lower than the same period of 2018 (55,344 Mt). The result also fell 4% compared to the average of the first 9 months. Even so, the regional balance was positive, with an increase of 4% in relation to the previous month (200,000 t), of which Brazil represented 97%, although this participation was 19% lower than in October 2018.

Even with a growth in the Brazilian production, the low production rate in Latin America at the beginning of the 4^th quarter points to low prospects for a resumption towards the end of the year, enough to reduce the accumulated deficit of 2019. Economic recovery is expected to occur in 2020, especially with reforms and resolution of some national crises.

“When there are reduction in domestic demand, steel producing companies, being capital intensive and operational continuity, balance their production with exportation. In these cases, exports, although they favor the trade balance, have the counterpart that are given at punished prices, since most of our governments do not sufficiently encourage exports as part of the country's competitiveness. Despite the reduction of the deficit, the September results show that expectations for the end of the year should be reviewed due to the low level of consumption and consequently low level of production, ”says Francisco Leal, Director General of Alacero.

Table 1: Production and Consumption of Latin American Steel Market in 2019 (1000tons)

In October, rolled steel production totaled 4,060 Mt, the worst indicator since February. The result represents a 12% decrease compared to October 2018 and 2.5% in relation to the previous month. The year to date was 8% lower than the same period of the last year, reaching 42,367 Mt. The figure was also 5% lower than the average of the first 9 months of the year.

The regional balance decreased by 3% compared to September, a deficit driven mainly by Brazil (84%), despite the strong growth of Argentina and Mexico, 12% and 2%, respectively, which brought down 73% of the Brazilian impact. Even so, the remaining deficit, although minimal, presents a contraction scenario in production that reached the 3rd consecutive monthly fall and shows low rates for the beginning of the 4th quarter, unfavorable to recover the accumulated fall.

Imports decrease

In September, imports totaled 1,761 Mt, which although they represented the best indicator since June, were 4% below the results observed in the same month of 2018. The accumulated until September remained 3% lower than last year's period (17,311 Mt). However, the final figure fell 12% since August and 9% since the first 8 months of 2019. A positive point in the third quarter was the slight decrease of 1% regarding the previous quarter of the share of Chinese imports, which represented 23%of total imports.

Export growth

Exports totaled 718 thousand tons, an increase of 22% compared to September 2018. The higher indicator since June, the result was also 11% higher than that recorded in August, although the accumulated until September decreased 6% compared to the same month of 2018 and the average of the first 8 months of the year. This result was driven by the 39% drop in Argentine exports compared to August, which was offset by the 51% increase in Brazil's steel exports. However, year to date, exports from these countries increased 6% and 1%, respectively.

Trade balance recovery

The Latin American trade balance registered a negative balance of 1.04 Mt, a deficit 23% lower than August, 17% lower than September 2018 and also the most favorable indicator since June. The accumulated deficit until September was also lower than in the same period last year (-1.3%).

In September, the consumption of rolled products amounted to 5,238 Mt, the worst indicator in 3 months, 6% lower than August and in relation to the same month of 2018. The accumulated until September remained 5% lower than in the same period of the last year, and the result was 4% lower than the average of the first 8 months of 2019. One of the key factors that contributed to this result were the political crises in Colombia, Chile, Peru and Ecuador, in addition to the economic recession in Argentina and Mexico. The countries that showed a positive balance until September were Brazil and Argentina, while the largest negative balances were Mexico, Colombia and Chile. The regional balance fell by 6% compared to August, and was led by Mexico, Chile, Brazil and Argentina. Costa Rica, on the other hand, resumed consumption with a 51% increase over the previous month.