The region’s gross domestic product (GDP) is now expected to rise by 2% year-on-year in 2018, against a previous forecast of a 1.9% increase, the IMF said in a report released in mid-April.
For 2019, the regional economy is now predicted to grow by 2.8%, compared with the previous estimate of 2.6% growth.
The economies of Brazil and Mexico, the largest steel markets in Latin America, are similarly expected to grow by 2.30% in 2018 on an annual basis, according to the International Monetary Fund (IMF). In 2019, Brazil’s GDP is expected to increase by 2.50%, while Mexico’s economy is estimated to increase by 3%.
The region’s steel output figures are in line with this positive outlook for its economies.
Crude steel production in South America was up by 6.80% year-on-year in the first quarter of 2018, to 11.13 million tonnes from 10.42 million tonnes, according to data published by the World Steel Association (Worldsteel) on Wednesday April 25.
Over the same period, Brazil’s crude steel output increased by 4.8%, to 8.64 million tonnes, while Argentinian crude steel production rose by 24.9%, to 1.23 million tonnes.
Meanwhile, crude steel output in Mexico grew by 1.50% in January-March 2018 on an annual basis, to 5.11 million tonnes, according to Worldsteel.
The behavior of the local and international markets in May will be decisive for Brazilian steel producers in relation to potential price adjustments.
In late March, CSN said that it intended to raise domestic flat steel prices by 7.50%, while Usiminas announced earlier this month its plans to increase prices by as much as 5%. Both mills set June as the deadline for these upswings.
These increases are based on a better national market and higher prices for flat steel products in the international market.
Indeed, Usiminas said that the price differentials between imported and domestic coil products, both hot-rolled and cold-rolled, are currently close to zero.
But uncertainties about the development of global flat steel prices, mostly in China, and fierce competition in the local market might prevent Brazilian companies from applying their planned price adjustments.
Metal Bulletin’s fob China HRC Index has fluctuated between $571 per tonne and $591 per tonne in the past 30 days. On Wednesday, the index was $591.79 per tonne fob, down by $2.64 per tonne on a daily basis.
Meanwhile, HRC import prices in South America, including Brazil, will end the month of April at values slightly lower than those in late March. Metal Bulletin’s weekly price assessment for HRC imports into the region was $610-620 per tonne cfr on April 20, against $620-630 per tonne cfr on March 29.
And the competition between Brazilian flat steel producers could get in the way of the companies’ plans to increase prices by June, according to local flat steel association Inda.
“The problem with any price increases is that the steelmakers fight for market share,” Inda president Carlos Loureiro said on April 24.
The International Monetary Fund (IMF) has recently raised its economic growth forecast for Latin America and the Caribbean while a gradual recovery continues in the region, which was severely affected by the 2014-16 decline in commodity prices.