The Latin America Steel Market:an Overview
Francisco Leal
OECD Steel Committee. March 2020, Paris
Introduction
2
▪ Once again: A challenging global environment. On top of the 2019 mentioned
uncertainties we are facing now new issues that could impact even more.
▪ Latin America's growth of only 0.2% in 2019 contrast to the previous year's
rate (1.6%), the expectations at the beginning of the year (2.1%) and the
potential GDP growth (close to 2.5%).
▪ A recovery is expected in 2020 and 2021: growth should reach 1.4% this year
and 2.1% the next. It would be based on the improvement of the global
environment plus some internal issues regarding idiosyncratic uncertainty and
an expansionary monetary policy in an environment of relatively low inflation.
▪ The recovery will be widespread, increasing growth, in a context of relatively
low commodity prices and downside risks, will be a great challenge.
Growth will remain weak relative
3
Source: IMF. WEO Feb 2019(e): estimated
0,3
-0,6
1,21,0
0,1
1,6
2,3
-2,0
-1,0
0,0
1,0
2,0
3,0
2015 2016 2017 2018 2019 2020(e) 2021(e)
GDP (%)
Steel Drivers: better 2020-2021
4
Source: Alacero(e): estimated
-1,4
0,3
1,4
-0,3
1,62,2
-5,3
3,73,4
0,3
2,5 2,2
-6,0
-4,0
-2,0
0,0
2,0
4,0
6,0
2016 2017 2018 2019 2020 (e) 2021 (e)
Industrial Production SWIP
81,9% 81,7%
18,1% 18,3%
2018 2019
PRIMARY IRON
Pig Iron Sponge Iron
45,9% 46,6%
54,1% 53,4%
2018 2019
CRUDE STEEL
EAF OBC
Construction still as the main driver. Steelmaking mainly BOF andlong products
5
Raw Production
44,85%
1,62%4,16%
15,48%
12,83%
20,24%
0,82%
Steel Weights(2019)
Construction Domestic Appliances
Electrical Equipment Mechanical Machinery
Metal Products Automotive
Other Transport
49,8%47,3%
2,9%
Finished Production(2019)
Longs Flats Seamless Tubes
Latin America GDP outlook
6
GDP Growth (%)
Source: Latin America from IMF WEO Oct 2019 - February data update. Others from National Regional Secretaries.(e): estimated
Country 2016 2017 2018 2019 2020(e) 2021(e)
LATAM -0,6 1,2 1,0 0,1 1,6 2,3
Argentina -2,1 2,7 -2,5 -3,1 -1,3 1,4
Brazil -3,3 1,1 1,1 0,9 2,0 2,4
Chile 1,7 1,3 4,0 2,5 3,0 3,2
Colombia 2,1 1,4 2,6 3,4 3,6 3,7
Dominican Republic 6,7 4,7 7,0 5,0 5,2 5,0
Ecuador -1,2 2,4 1,4 -0,5 0,5 1,6
Mexico 2,9 2,1 2,0 0,4 1,3 1,9
Peru 4,0 2,5 4,0 2,6 3,6 4,0
Venezuela -17,0 -15,7 -18,0 -35,0 -10,0 -5,0
Latam ASU Outlook for 2020-2021
7
Million Tons
Other Latam: Bolivia, Costa Rica, Cuba, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panamá, Paraguay,
Trinidad & Tobago and Uruguay.
Country 2019 2020(e) 2021(e)
LATAM 64,2 65,9 68,1
Argentina 3,9 3,9 4,2
Brasil 20,6 21,7 22,8
Chile 2,6 2,7 2,7
Colombia 3,6 3,8 3,8
Dominican Rep. 0,6 0,6 0,6
México 24,2 24,6 25,0
Peru 3,8 3,8 3,9
Venezuela 0,1 0,1 0,1
*Others Latam 4,7 4,8 4,9
Latam ASU Outlook 2020-2021 (%)
8
Growth Rate (%)
Other Latam: Bolivia, Costa Rica, Cuba, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panamá, Paraguay,
Trinidad & Tobago and Uruguay.
Country 2019 2020(e) 2021(e)
LATAM -4,3% 2,8% 3,3%
Argentina -18,8% -1,6% 8,1%
Brasil -2,7% 5,2% 5,0%
Chile -3,6% 1,5% 1,7%
Colombia -1,7% 5,5% 1,9%
Dominican Rep. 11,0% 5,2% 5,0%
México -5,3% 1,4% 1,6%
Perú -6,7% 1,8% 2,0%
Venezuela -30,0% -10,0% -5,0%
*Other Latam 9,1% 2,4% 2,8%
67,60
52,89
25,09
10,62
67,58
54,25
23,74
9,69
64,17
50,38
22,76
9,06
0
10
20
30
40
50
60
70
80
Consumption Production Imports Exports
2017 2018 2019
-5.05%-0.02%
+2.57%-7.12%
-5.40%-4.12%
-8.81%
-6.52%
Latin American steel market between 2017-2019
9
Million Tons
Source: Alacero
10
*ALACERO and WorldBank - March/2020 *IMF - March/2020
Latin American GDP and Consumption per Capita until 2021 outlook
120
115
106
109
108
102
104
107
9,962
8,676
8,240
8,815
8,411
8,252
8,456
8,838
8000
8500
9000
9500
10000
100
105
110
115
120
125
2014 2015 2016 2017 2018 2019 2020 (e) 2021 (e)
Consumption per Capita LATAM GDP per Capita LATAM
Tons per Capita USD per Capita
General View
11
Latin America deep impact
consequences
▪ The effects of the trade war between the
United States and China in 2019 caused
uncertainty in Latin America. At the end of
the year countries such as Brazil, Chile,
Colombia and Peru saw their exports fall.
▪ It has been reported that at the regional level,
the fall in Peruvian exportable supply (-4.2%)
was the fourth most critical after Brazil (-
6.6%), Chile (-5.7%) and Colombia (-5.4 %).Source: worldbank
Risks and opportunities
12
▪ According to OECD and World Economic Forum in emerging Latin America growth
persistently low and so unevenly distributed compared to emerging Asia despite
a huge potential, which is been ranging around 2-3%.
▪ Various factors are adding to this complex situation:➢ dependence on commodities
➢ poor education
➢ weak business environments
➢ corruption
➢ low productivity: high informality and weak competition
▪ The scenario for the economic growth is still challenging, low activity data and the
impacts of the coronavirus outbreak, on prices and global demand for commodities.
▪ Despite the short-term risks, improving the prospects for the world economy should
favor the Latin American economy, but the big challenge for 2020 will be growth.
Mexico, and only Chile has room for tax incentives. In addition, political restrictions
will make it difficult to approve economic reforms.
Final comments
13
▪ The steel industry in the Latin America region is facing new challenges,
but the potential to growth is still there. Now we must focus on:
• Imports substitution by the new added finished steel capacity with border
protection against unfair competition
• Revert the deindustrialization process by industrial policy focus directed to
productivity, innovate and assimilate new technologies
• Be aware of the global trade tensions and commodities prices
▪ A continuous fall in the finished steel trade deficit, without increasing
production, could lead to a new set of risks of deindustrialization and
loss of competitiveness
▪ A growing urge for the governments, to make sure the there is a “level
playing field”.
The Latin America Steel Market:an Overview
Francisco Leal
OECD Steel Committee. March 2020, Paris