Internal and external factors press the steel industry in Latin America

Amid the trade war between the United States and China and a scenario of uncertainties in most of Latin America, the main players in the region's steel industry met in Buenos Aires, Argentina, Nov. 12-13 at Alacero 60, the Latin America Steel Congress.

In the two days of panels, more than 1,000 registrants from more than 37 countries representing Latin America, Europe and Asia followed the debate of experts about the steel landscape and the projections for the future, according to a news release from Alacero Latin American Steel Association.

“It is worrying for the region the strong imbalances in the trade balance, particularly with China. Not only our deficit with this country is very large, but 90 percent of what we export are primary products,” said Máximo Vedoya, Alacero president and CEO of Luxembourg-based Ternium in his opening address.

In an executive’s session, Martín Berardi, president of the Organizing Committee of Argentina and the Argentine Chamber of Steel and president and CEO of Ternium Argentina, said, “We face the possibly more complex circumstances we have experienced, with a tendency towards regionalization and trade wars. Latin America is still facing its own problems, with important political and economic changes and social contentions that emerge in several countries and that are in a process that is far from over.”

Sergio Leite, CEO of Usiminas, one of the largest steel producers in Latin America, said the company is seeing a reduction in world trade due to the increase of barriers by several countries and a “great volatility in the prices of our main inputs, which leads to a reduction in trade margins."

The use of steel in China was another point of concern.

“The intensity of steel use decreases as the economy develops. We are already beginning to see some latency now in China, where in the big picture we can see a fall,” said Edwin Basson, director of the Brussels-based World Steel Association.

Paul Butterworth, a commodities expert and consulting manager at United Kingdom-based CRU Group, added, "The steel market looks relatively healthy from the perspective of industry management.”

The forecast for the production of crude steel in 2024 is a growth of 1.5 in the next five years, the equivalent of additional production of 100.4 million tons, according to CRU.

Given this scenario, participants considered the adoption of an agenda of solutions for the next four years for the steel industry in Latin America and in general for the economic-political agenda of the region.

In the analysis of Andrés Malamud, a political scientist and principal researcher at the Institute of Social Sciences of the University of Lisbon, Latin America is fragmented and reunified in different directions, which brings a complex reality to the region. Faced with that, he explained that Brazil, an important market participant, continues in a process of political and economic reform, but that projects a favorable 2020.

"The historic banking concentration is changing, and new actors are offering credit," he said.

For Antonio Ortiz-Mena, senior vice president at Albright Stonebridge Group (ASG), Washington, the trade war is a structural fact, which is linked to the new trade agreement between the U.S., Mexico and Canada.

"A regional agreement at the Latin American level with Mexico is unlikely," he said.

For more of Alacero’s coverage of the conference, click here.