Posted on 08 Feb 2023
Factors such as pandemic and war in Ukraine affected the sector in 2022; Inflationary pressures, currency restrictions and political uncertainties are challenges for the new year.
Depreciation of Latin American currencies became the agenda as of May 2022. Linked to the appreciation of the dollar and the impacts of the conflict between Russia and Ukraine, there is a reduction in the price of raw materials in general. However, in parallel, the Latin American industry presents a scenario of a moderate drop in demand. The region’s apparent consumption, which in 2021 was 74.9 Mt (+25.8%), after the first 8 months of the previous year, pointed to an expected drop of 9.5%, and should close at 67.8 Mt in 2022. Therefore, the region should close 2022 with 105 kg/per capita, equal to the 2018-2019 average. This projection is part of Latin America in Figures 2022, published in December by Alacero.
Despite the larger drop in Latin America, it can be observed that the region was more resilient, consuming the same 46% of the world average obtained in that period per person. In turn, the world is expected to shrink by only 3.7% in 2022 (226 kg/per capita), below the average of the last two years prior to the pandemic (228 kg/per capita). The expectation of an effective regional recovery forecast for mid-2022 should only occur from this year onwards (+1.7%).
“Political uncertainties are also potential obstacles, which could interfere with the implementation of the structural reforms needed in the region. In 2023, the level of attention is increasing around expectations of lower global growth and less favorable financial conditions. Thus, a slow normalization of frictions in post-pandemic production chains would boost production growth in steel-consuming sectors. Therefore, we reinforce that the biggest challenges in 2023 for Latin American markets are increased inflationary pressures, additional foreign exchange constraints and political uncertainties,” assesses Alejandro Wagner.
Another factor contributing to the sector’s performance was the cost of gasoline, which rose steadily throughout 2022, impacting public transportation, government budgets and agriculture. Crude oil prices rose further in late February in response to the Russian invasion and subsequent Western sanctions. “Higher energy prices put pressure on government budgets as politicians try to keep costs down by limiting price increases, cutting taxes or increasing subsidies. These policies have drawbacks, including diverting budgets from other social spending. In other words, rising energy prices have different impacts on countries in the region, depending on their energy trade balance position and their refining capacity and favorable domestic prices,” concludes Wagner.
Consumption and Production
Data from Alacero, the Latin American Steel Association, indicate that, in November 2022, crude steel production reached more than 4,900 thousand tons, 8.8% less than in the previous November and 6.5% less than the previous month. Colombia fared better with a growth of 2.6% compared to November 2021. In the first 11 months of 2022 it was 4.1% below the same period of the previous year. In Colombia this drop was lower than the region with -1.6% in the first 11 months.
Production of finished products reached 4,440 thousand tons, being only 0.9% higher than the same month last year and 3.7% lower than the previous month. Colombia managed to stand out from the region with the largest year-on-year variation among the countries in the region, reaching 161.3 thousand tons of rolled products produced, the equivalent of 14.8% more than November 2021. In the first 11 months of 2022, it was 2.9% below the same period of the previous year. Already Colombia was 4.7% below in the first 11 months of 2022 compared to the same period of 2021.
As for trade data, imports of finished steel, in October 2022, reached 1,938 thousand tons, being this figure 17.7% lower than in the same month of 2021 and 7.1% lower than in the previous month. In the first 10 months of 2022 (21,337 thousand tons) it was 11.4% below the same period of the previous year. As for exports, 663.2 thousand tons were recorded in October 2022, 25.1% lower than in the same month of the previous year and 18.0% lower than in the previous month (September 2022). In the first 10 months of 2022 (9,104 thousand tons) was 31.1% higher than the same period of the previous year.
Finished steel reached a consumption of 5,765 thousand tons, 3.6% lower than the previous October and 1.2% lower than the previous month. In the accumulated of the first 10 months of 2022 (58,508 thousand tons), it was 8.1% below the same period of the previous year. With highlights in the first 10 months of 2022 (58,508 thousand tons), it was 8.1% below the same period of the previous year: Chile (-29.2%); Colombia (-14.0%); Brazil (-12.1%); Mexico (-3.7%); Argentina (+1.8%); and Peru (+9.2%).
Source:Alacero
