Steel group warns excess global capacity could harm Latin America

Excess global steel capacity is expected to increase to 644Mt by 2025, threatening thousands of jobs and the long-term viability of the Latin American steel industry, says regional trade group Alacero. 

"Latin America is facing a challenging moment, marked by limited growth prospects and political uncertainty. Steel demand contracted in all countries in the region in 2022, totaling 68.7Mt, a reduction of 8.5% overall. As moderate growth is projected in all sectors, steel demand is expected to grow in 2023 and 2024 by 1.1% and 2.7%, respectively," Alacero executive director Alejandro Wagner told BNamericas.

While the region's annual production of crude steel exceeds 60Mt, global capacity last year reached 2.463Bt, effective production was 1.885Mt and China contributed 1.018Bt. Surplus capacity was 578Mt, of which China accounted for 132Mt, according to Alacero data.

The Asian country represents 54% of world production and 22.8% of surplus capacity.

In 2022, Latin America had production capacity of 105.9Mt, with effective production of 62.1Mt and a surplus of around 44Mt. Despite the fact that the region represented 3.3% of world production, it contributed 7.6% of the total surplus, balancing world supply, says Alacero.

"We are constantly monitoring foreign imports from countries outside the region, which currently account for 90% of Latin American imports. In 2022, 29% of these imports came from China, while the US accounted for 21% and Japan 10%," Wagner added.

"Steel imports from Asia threaten not only manufacturing jobs in Latin America, but also the environment, as the region's carbon footprint averages 1.6t CO2 equivalent per ton of steel produced; the world's, 1.9t and China's 2.2t," he said.

The steel industry plays a key role in the regional economy, generating close to 1.4mn jobs, both direct and indirect.

Alacero continuously monitors antidumping measures as well as safeguards and government subsidies. "A concrete example is that, of the 65 antidumping actions currently pending in the WTO, which were presented by Latin American companies, 43 involve China," said Wagner.

The Alacero head is concerned about the incentives to export that Asian countries have, which he said create distortions in international competition and market diversion. Alacero projects that steel exports to the region could rise, creating greater oversupply.

Global excess capacity encourages unfair trade practices and discourages efficient and sustainable production, Alacero said in a recent statement.