In April this year, the crude steel production in the Latin American region amounted to 3.55 million mt, falling by 34 percent year on year due to lower demand and the suspension of operations, according to a press release by the Latin American Steel Association (Alacero). The press release noted that production has been affected by the economic crisis caused by the coronavirus pandemic. This situation is expected to continue until the third quarter of the year. In the January-April period, crude steel production in the Latin American region declined by 14 percent year on year.
In April, Latin America’s rolled steel products output dropped by 32 percent to its lowest level since January 2009, while rolled steel product output decreased by ten percent in the January-April period of the year, both on year-on-year basis. Moreover, apparent steel consumption was down by nine percent in March year on year. The association noted that Argentina and Brazil were the countries most affected by the coronavirus pandemic in April, recording a decrease in rolled steel production of 73 percent and 37 percent, respectively, compared to the same month of 2019. Alacero also stated that Latin America countries will recover at different times and that Latin America will probably be one of the last regions to normalize its economic activity.
In April, global steel production declined by 13.5 percent compared to the same month of the previous year and fell by seven percent month on month, while China’s production in the same month increased by 0.2 percent year on year and was up by eight percent when compared to March. Alacero general manager Francisco Leal stated, “The risk is that China, which has begun its recovery, will seek to place its surplus via export, as it has been doing, thus generating greater damage to the Latin American industry and delaying or restricting its recovery, which will become necessary in the coming months.”
In the region, some plants have halted their blast furnace operations in order to balance supply and demand and seven blast furnaces with a total seven million mt of capacity were suspended in April and May due to coronavirus. Accordingly, as of April capacity utilization in Latin America was at 42 percent, lower than the capacity utilization rates in the US, CIS and the Middle East.
According to Alacero, governments in the region should analyze and implement strategies to have a robust steel industry, with high integration with its value chains, defense of their domestic markets, and first-rate products and services for their customers.
Leal pointed out the financial risks related to operating the industry at a low capacity utilization over a long time, noting that the Latin American industry is a capital-intensive and high fixed-cost business that needs to operate at 80 percent of its capacity.