Posted on 12 Sep 2022
Data from the Latin American Steel Association indicate that the region was 2.3% lower in the first half of 2022 in comparison with the same period of 2021
Inflationary pressures, political uncertainties and the protection of the Latin American steel market are factors that determined the performance of the industry in the first half of 2022. But according to data from Alacero, the Latin American Steel Association, responsible for concentrating 95% of the chain production, the period was better than expected.
“Regional growth was possible thanks to the record prices of raw materials, the main exports of Latin America. On the other hand, the inflationary pressures that led central banks to raise interest rates predict a slight slowdown ahead. However, market expectations point to an economic slowdown in 2023, in addition to the multiple challenges facing the industry, sustainability being the greatest”, explains Alejandro Wagner, executive director of the entity.
In the first six months of 2022, crude steel production in Latin America fell 2.3% compared to the first half of 2021 and 3.1% compared to the second half of the same year. Countries such as Chile (-14.1%), Peru (-10.1%), Brazil (-2.8%) and Mexico (-1.2%) and Colombia (-0.6%) presented reductions. For its part, Argentina recorded an increase of 4.1%. That is what the data from Alacero, the Latin American Steel Association, an entity responsible for integrating around 95% of the material production chain in the region, indicates.
Finished steel production was 1.4% below the first half of the previous year and 0.4% below the second half of the same year. The reductions occurred in Chile (-19.9%); Brazil (-9.2%); Argentina (-4.5%) and Colombia (-2.3%). Peru (+0.3%) registered stability and Mexico continued to grow, having obtained 13.6% in the first semester.
“Each country has its peculiarities for the performance of the industry, which is one of the most important in all economies, but, in general, the international crisis caused by the Russian war turned out to be longer than expected. Therefore, the trend is for consumption to remain low until 2023”, analyzes the expert.
Regarding crude steel production data as of June 2022, the monthly comparison indicates that production was 5,318.7 thousand tons, 4.2% lower than the same period of the previous year and 2.6% lower than that of May 2022. The production of electric furnaces also fell by 5.7% monthly, while blast furnaces increased by 0.7%. Both data are in relation to May 2022. Regarding the production of finished products, when the monthly comparison is made, the production of June was 4,667.0 tons, 3.0% lower than that of the previous June and 0 .7% lower than the previous month, May 2022.
In the scenario analysis, Brazil presented a negative performance due to the slowdown in activity due to the tightening of monetary policy, impacting the rise in construction costs. In terms of expectations, it is expected to continue to keep pace with inflation. In Colombia, on the other hand, rising short-term inflation and high interest rates reduce the dynamism of growth. In the medium term, the change of government added to the ordering of monetary policy may boost some sectoral growth.
Argentina, which continued to grow, was driven by growth in agriculture, the auto industry, construction, and energy. June’s growth is explained in part by the regularization of the steel mills, after a month with scheduled technical shutdowns. This allowed crude steel production to increase by 3.7% compared to May.
Finally, the data for Mexico is justified since, by not reducing inflationary pressures, the Central Bank maintains the contractionary bias of its monetary policy, which has a direct impact on the prices of raw materials. Laminates continue to be supported by the increase in the production of both domestic and automotive products.
Source:Alacero
