Blast furnaces from Mexico to Argentina want to ease Latin America’s growing dependence on Chinese steel, and a push by the Asian giant to clean up its own industry may just be the catalyst.
As output from China’s vast steel sector soars, Beijing seeks to temper the market through pollution controls and capacity reductions. Ultimately, these policies could open the door to Latin American producers such as Ternium SA and Gerdau SA will replace imports which represent more than a third of the region’s supplies, according to Alexandre wagner, the new head of the Latin American steel association Alacero.
To take full advantage of a potential slowdown in Chinese production in the future, Latin American governments must create conditions that help steel producers compete globally, including by lowering taxes and by streamlining logistics and bureaucracy, Wagner said in an interview.
“If there is no excess steel dumped in Latin America at bargain prices under different competitive conditions, of course Latin America can produce more steel,” Wagner said. “And, of course, green steel.”
Right now, Latin American countries have levies that too “eat up” producers’ profits, he said. Countries in the region also need to improve supply chains, which Wagner says can make it as expensive to move goods within a country as it is to bring them in from China.
The region’s steel industry has already returned to pre-pandemic production levels, a recent report by the association shows, although imports continue to be a risk. A pickup in residential and commercial construction has facilitated the recovery, but uncertainties about vaccinations remain, Wagner said.
Steel futures remain elevated even after falling last month. Wagner expects prices to stay around current levels until the end of the year before running out of steam.
– With the help of Joe Deaux