The Latin American steel association, Alacero participated in the 74th Steel Committee Meeting of the OECD held in Paris in July.
This industry summit gathered government representations of 34 countries, industrial associations, unions and consultancy firms.
Each region described its present economic situation and the prospects for its steel industry. Alacero presented its research on Latin America. The first part of the document focused on current economic issues in the region. Global uncertainty, China´s slow-down and the Eurozone´s and USA´s continued stagnation affect Latin America. The perspectives for raw materials prices represent another concern for the region.
Alacero´s report then turned its focus to the situation of Latin American industry in general and the steel industry in particular, stating the facts that threaten the sector. In 2012, Latin American industrial production declined -0.1%, led by Brazil and Argentina.
In the steel market, currency overvaluation translated into increasing imports and fewer exports. Since 2012, Latin America has become a net importer of steel. That same year, production dropped 3%, driven by Argentina, Colombia and Venezuela. Since then, the gap between production and consumption has been covered by massive low priced imports.
2013 should be a better year, with industrial production expected to grow 2.8% and in 2014, modest grow is expected to continue. However, it is necessary to wait until the final quarter of 2013 for a more accurate forecast.
Unfair trade conditions and local currency overvaluation resulting from the export of vast quantities of ore, mainly from Brazil, Chile and Peru represent a serious threat to regional competitiveness and deepen deindustrialisation.
The price of raw materials price is another important problem for the region. Raw materials are the main driver of some Latin American economies and represent 52% of Latin American exports. China is the main market for these. Consequently, the deceleration of its economy leads to lower demand and a probable price drop.
This situation affects mineral exporters such as Peru, and Chile, which, because of their low debt levels and good fiscal situation, they should be capable of implementing measures to prevent a slowdown. On the other hand, this situation may become an opportunity to highlight the importance of and trigger industrialisation across the continent.
The Committee analysed the global situation for steel and highlighted overcapacity as a major challenge for the years to come. Excess production in China threatens the entire industry and especially affects Latin America, the second largest destination for its steel exports.
Discussions and presentations highlighted the concerns about the continued rise in capacity in certain areas, without a corresponding growth in consumption. Another issue of concern was the increasing governmental involvement in the sector observed in some countries and the potential risks of trade distortions.
Other issues discussed included: the application of protectionist measures in the global steel market, artificial restrictions to raw materials exports that cause market imbalances, and issues related to energy and the environment.