The Latin American Steel industry faces two fundamental challenges: the attractiveness of its markets to exporters in the context of global overcapacity, and the low average steel consumption in the region.

During the biannual Board Meeting of the Latin American steel association, Alacero, held in Buenos Aires, presided over by Mr Benjamin Baptista, President of Alacero, the directors of the associated companies analysed these challenges and the perspectives for the regional industry.

According to data in a recent study sponsored by the Steel Committee of OECD (Organization for Economic Co-operation and Development), global steel production overcapacity has reached 542Mt, about 27% of total global production capacity. The same study also states that the excess capacity mostly originates in major exporting countries such as Russia and China and also India where the domestic market has faltered. In these countries overcapacity can reach up to 50%. China stands out within this group where production capacity will increased seven-fold between 2000 and 2015 at the current rate of expansion. Capacity in the rest of the world will grow about 43% during the same period. In Latin America, the increase is expected to be 55%.

Given current perspectives for Latin America of a 5.3% growth in apparent steel use in 2013, the region becomes an attractive destination for exports; especially from China as its main international markets are still struggling with the global crisis. In 2012, Latin America received 5.4Mt of steel products from China.

Latin America has sufficient production capacity to satisfy its growing demand. According to Mr Baptista: “Latin American steel industry has taken great steps to improve its competitiveness. However, these efforts sometimes cannot be adequately harnessed because of the lack of policies that promote national industry and because of the presence of imports that arrive to our region under unfair trade practices. The key concern of our industry is the massive arrival of steel containing products. A study ‘Latin American Metal-mechanic Chain: economic importance, opportunities and threats’ conducted in 2012 shows that for every $1M of imports, our region loses up to 63 direct, indirect or induced jobs in the metal/mechanic value chain”.

In 2013, Alacero will continue its efforts to promote Latin American industrialization, sponsoring a new study that will be presented at the next Alacero-54 Steel Congress, in Lima, Peru between November 10th and 12th. This new research on the metal-mechanic value chains of Argentina, Brazil, Colombia and Mexico, will analyse the sector from the investment standpoint, looking into investment carried out in recent years and future perspectives.
Per capita Steel consumption reveals how developed an economy is. Accordingly, in most developed economies, consumption is higher and today averages about 300kg per year. Latin America still shows important growth opportunities as regional steel consumption averages just 130kg per inhabitant, very low compared to the global average (234kg)and just over one quarter (27%) of China´s per capita consumption of 479kg. In Latin America, per capita consumption ranges from just 12kg in Bolivia to 176kg in Chile. Brazil, the largest steel producer in the region, has a per capita consumption of 136.7kg (worldsteel data for 2011).

Future evolution of the factors that boost steel consumption in the region becomes a key issue to be addressed by Alacero in 2013. Investments in infrastructure, energy and mining are some of these steel intensive markets. However, these have suffered obstacles slowing the dynamic path they showed two years ago.
The expansion of the middle classes in Latin American countries constitutes a second driving force. During the Alacero Board meeting, the Association announced that this issue will be addressed during the next Alacero Congress, with a panel exclusively dedicated to discuss it. Pablo Sanguinetti (Latin American Development Bank, Socioeconomic Studies Director) and Augusto de la Torre (World Bank, Chief Economist for Latin America and the Caribbean) will participate in the debate.

Mr Baptista concluded: “Latin America is facing a historical moment of growth. Regional steel value chain should be a fundamental pillar to build this growth on. Our industry has enough capacity to offer world-class products and close service in competitive conditions. But a context that promotes fair trade conditions in the region is essential to achieve the goal of an industrialized Latin America”.