COVID-19: Latin America’s steel industry sailing in uncharted waters

It’s been only a couple of months since the Covid-19 pandemic has overwhelmed the world like a tidal wave, triggering a chain reaction with disruptions along the entire supply chains and resulting in one of the most severe global economic crises in history. All industries have been hit hard, including the steel sector, with many companies currently struggling to swim back to the surface.

How is the situation in Latin America? According to the latest data (March 2020) provided by Alacero, the Latin America Steel Association, the situation does not look promising, as steel production continues to decline. Let’s take a look at three of the major Latin American steel producing countries.

Mexico
Mexico's GDP contracted by 2.4% in the first quarter compared to the same period last year. This is the steepest decline since the third quarter of 2009. The downturn is mostly driven by the construction and automotive industries. The Mexican automotive sector has performed poorly throughout the whole first quarter, with an 8.5% drop in its production compared to the same quarter of 2019, and a 7% drop in exports as well.

Brazil
Compared to February, the Brazilian industrial activity has sunk by 9.1% in March. This is mainly due to the severe restrictions which forced many steel manufacturers to temporarily shut down their production. The 2.6% drop in the first quarter of 2020, compared to the previous three months, was the sharpest downturn since the second quarter of 2018.

Argentina
In Argentina, manufacturing activity contracted by 0.9% in March compared to February, and fell by 6.4% compared to the same month last year. Automotive and cement industries halted production.

China and Latina America
China’s fast recovery in the steel industry is also raising a lot of issues and concerns, as voiced by Francisco Leal, CEO of Alacero:
“In the face of the sharp drop in world markets it [China] will continue seeking to export its production to Latin America, which could make the recovery of the region even more difficult”.

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