The global slowdown in economic trade and activity since the beginning of 2018 made the global steel market return to conditions similar to 2016, Alacero said in a press release today, adding that with the downward trend in demand for steel worldwide, the expectation is that will capacity grow again in non-OECD countries, especially in China, and that the consumption of crude steel enters a plateau period until 2026. Alacero said Latin America is the region with the lowest economic growth, and although the circumstances are different in each country, uncertainties predominate and the issue of economic inequality stands out.
Against the backdrop, Alacero reported that Latin American production of crude steel in October was 14 percent lower than the same month of 2018, totaling 5.674 million metric tons. The year-to-date total through October was 8 percent lower than the same period of 2018 (55.344 million mt). The result also fell 4 percent compared to the average of the first 9 months. Even so, the regional balance was positive, Alacero said, with an increase of 4 percent in relation to the previous month (200,000 mt), of which Brazil represented 97 percent, although this participation was 19 percent lower than in October 2018.
Even with a growth in the Brazilian production, Alacero said the low production rate in Latin America at the beginning of the 4th quarter points to low prospects for a resumption towards the end of the year, enough to reduce the accumulated deficit of 2019. Economic recovery is expected to occur in 2020, especially with reforms and resolution of some national crises, the association said.
“When there is reduction in domestic demand, steel producing companies, being capital intensive and operational continuity, balance their production with exportation. In these cases, exports, although they favor the trade balance, have the counterpart that are given at punished prices, since most of our governments do not sufficiently encourage exports as part of the country's competitiveness. Despite the reduction of the deficit, the September results show that expectations for the end of the year should be reviewed due to the low level of consumption and consequently low level of production,” said Francisco Leal, Director General of Alacero, in the press release.
In October, rolled steel production totaled 4.060 million mt, the worst indicator since February. The result represents a 12 percent decrease compared to October 2018 and 2.5 percent in relation to the previous month. The year to date was 8 percent lower than the same period of the last year, reaching 42.367 million mt. The figure was also 5 percent lower than the average of the first 9 months of the year.
The regional balance decreased by 3 percent compared to September, a deficit driven mainly by Brazil (84 percent), despite the strong growth of Argentina and Mexico, 12 percent and 2 percent, respectively, which brought down 73 percent of the Brazilian impact. Even so, the remaining deficit, although minimal, presents a contraction scenario in production that reached the 3rd consecutive monthly fall and shows low rates for the beginning of the 4th quarter, unfavorable to recover the accumulated fall, Alacero said.
In September, imports totaled 1.761 million mt, which although they represented the best indicator since June, were 4 percent below the results observed in the same month of 2018. The accumulated until September remained 3 percent lower than last year's period (17.311 million mt). However, the final figure fell 12 percent since August and 9 percent since the first 8 months of 2019. A positive point in the third quarter was the slight decrease of 1 percent regarding the previous quarter of the share of Chinese imports, which represented 23 percent of total imports.
Exports totaled 718,000 mt, an increase of 22 percent compared to September 2018. The higher indicator since June, the result was also 11 percent higher than that recorded in August, although the accumulated until September decreased 6 percent compared to the same month of 2018 and the average of the first 8 months of the year. This result was driven by the 39 percent drop in Argentine exports compared to August, which was offset by the 51 percent increase in Brazil's steel exports. However, year to date, exports from these countries increased 6 percent and 1 percent, respectively.
The Latin American trade balance registered a negative balance of 1.04 million mt, a deficit 23 percent lower than August, 17 percent lower than September 2018 and also the most favorable indicator since June. The accumulated deficit until September was also lower than in the same period last year (-1.3 percent).
In September, the consumption of rolled products amounted to 5.238 million mt, the worst indicator in 3 months, 6 percent lower than August and in relation to the same month of 2018. The accumulated until September remained 5 percent lower than in the same period of the last year, and the result was 4 percent lower than the average of the first 8 months of 2019. One of the key factors that contributed to this result were the political crises in Colombia, Chile, Peru and Ecuador, in addition to the economic recession in Argentina and Mexico. The countries that showed a positive balance until September were Brazil and Argentina, while the largest negative balances were Mexico, Colombia and Chile. The regional balance fell by 6 percent compared to August, and was led by Mexico, Chile, Brazil and Argentina. Costa Rica, on the other hand, resumed consumption with a 51 percent increase over the previous month.
With a third-quarter consumption shutdown lower than expected and a lower production level in October than the annual average, Alacero said the outlook for 2019 is undergoing to a new adjustment of 65 million mt of total consumption. The reduction of the trade deficit must be accompanied by a resumption on production levels by 2020, with the expectation of increasing consumption and strengthening the domestic market.