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Lower Crude Steel Production in 33 Months Worries Latin American Steel Market

Steel News - Published on Thu, 07 Nov 2019

Image Source: Alacero
Latin American steel association Alacero said that amid the political and economic crises that have been impacting domestic markets in Latin America and external competitiveness, the regional trade deficit widened in September. Crude steel production totaled 4.692 million tonnes, the worst indicator in 33 months since December 2016, when the result reached 4.651 million tonnes. The figure fluctuated down, 5% behind the 4.922 million tonnes observed in August. In addition, it slowed: fell 16% compared to September 2018, 7% year to date through September, and was 9% below the average of the first 8 months. The 5% drop in the negative regional balance was driven by Brazil (48%), Mexico (24%) and Argentina (12%). It said “One of the reasons for the reduction in production was the increase in iron ore costs, which impacted companies' margins. Given the low price of steel and the jump in the cost of raw materials, some producers have optimized their production. Another factor was the shutdown of three major blast furnaces in Brazil, the largest steel producer in the region. The downward prospects for the three largest regional producers do not favor a regional recovery for the year.”

Consumption of finished products reached 5,615 million tonnes in August, an increase of 2% over July and the best indicator in 5 months. However, the result was 6% lower than in August 2018, when 5,977 million tonnes were registered. Although it was 4% higher than the average of the first 7 months of the year, the total accumulated until August fell 5% over the previous year. The regional balance was positive at 135 thousand tons, an increase of 2% compared to July. The increase was driven by Argentina (40%), Brazil (36%), Chile (36%) and Mexico (20%). On the other hand, Costa Rica saw its demand fall by 50% from July to August, accompanying other countries that also registered a drop, such as Colombia and Ecuador (-9 thousand tons).

Finished steel production also declined and ended September at 4,177 million tonnes, down 8% from September 2018, reaching the lowest level in 7 months. The result was 2% below the average of the first 8 months and retreated 7% in the year to September until 2018, although it decreased 0.9% compared to August. The 0.9% drop in the negative regional balance of 39 thousand tons was led by Mexico and Argentina, which, in addition to adding negatively to the deficit, had larger negative individual balances than the regional one. Brazil recovered with the best production since May, with 1,932 million tonnes. The Brazilian result hit 82% of the impact of Argentina and Mexico. Even so, the remaining deficit, albeit minimal, points to an economic stagnation that shows fragility in the fourth quarter.

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Posted By : Amom Remju on Thu, 07 Nov 2019
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