Industry Rafael Rubio OECD Steel Committee Brussels, Belgium April - - PowerPoint PPT Presentation

▶

Dec 18, 2023 556 likes •721 views

The challenges of the Latin American Steel Industry Rafael Rubio OECD Steel Committee Brussels, Belgium April 19, 2016 Agenda I) Introduction. II) Short Term Challenges. III) Long Term Challenges. IV) Final Comments. 2 Introduction

SLIDE 1

The challenges of the Latin American Steel Industry

Rafael Rubio OECD Steel Committee Brussels, Belgium – April 19, 2016

SLIDE 2

Agenda

I) Introduction. II) Short Term Challenges. III) Long Term Challenges. IV) Final Comments.

SLIDE 3

Introduction

The region has been experiencing economic deceleration for the

last five years, with 2015 becoming the first year of economic contraction since 2009.

Latin America weakness: Falling commodities prices, slowing

China´s growth, tightening financial conditions, weak global demand, lack of economic reforms and institutional issues.

This was confirmed by the latest IMF´s WEO, where Latin

America outlook was once again lowered, from -0.3% to -0.5%.

The Latin American´s steel market is also seriously affected by

the economic slowdown and growing imports.

SLIDE 4

Short Term: External Factors to the Industry: The Growth Cycle

ARG 0% LATAM 0% BRZ -4% CH 2% COL 3% DOMRP 5% EC 0% GUAT 4% MX 3% PR 3% VEN -8% ECU 5% ARG 4% LATAM 4% BRZ 4% CH 5% COL 4% DOMRP 5% GUAT 4% MX 2% PR 6% VEN 5% GREEN: 2000 - 2008 RED: 2014 - 2016

SLIDE 5

The Economic Scenario

There is an urgent need to retake the growth path. Structural

reforms are needed. The fiscal and monetary stimulus capacity is limited.

The situation within the region is diverse:

− There are countries that have taken some economic reforms but they are not enough to sustainable growth (Chile, Mexico, Colombia and Peru). − There are countries that have economic and structural limitations to sustainable growth (Ecuador, Dominican Republic and Guatemala). − And there are countries that are in a recession and also have serious political and social issues (Brasil, Argentina and Venezuela).

SLIDE 6

Key Driver: the Role of Government

Economic Freedom 2015 Country Ranking Hong Kong (1) 1 Chile (11) 12 Guatemala (55) 40 Peru (35) 49

Dom. Rep. (64)

60 Mexico (72) 71 Colombia (92) 93 Brazil (85) 94 Ecuador (105) 106 Argentina (117) 119 Venezuela (124) 123 Ease of Doing Bussines 2016 Country Ranking Singapore (1) 1 Mexico (39) 38 Chile (41) 48 Peru (35) 50 Colombia (34) 54 Guatemala (73) 81

Dom. Rep. (84)

93 Brazil (120) 116 Ecuador (115) 117 Argentina (124) 121 Venezuela (182) 186

Sample: 157 countries. In parentesis 2014

Source. Frasier Institute

Sample: 189 countries. In parentesis 2015

Source: World Bank

SLIDE 7

Short Term: Internal Factors to the Industry

The steel market outlook given the unsolved
vercapacity issue:

− Economic growth below potential. − Reduced activity of steel end-users. − Weak steel demand environment. − Depressing prices and decreasing margins. − Imports taking a growing share of ASU. − Growing and controversial unfair trade. − Trade frictionws.

SLIDE 8

Latin America Steel Demand Outlook for 2016

Growth Rate (%)

Other Latam: Bolivia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Panama, Dominican Rep. and Uruguay.

Country 2015 2016 2017 Latin America -3.3%

2.0%

3.6% Argentina 4.9%

8.9%

5.5% Brazil

16.7% -8.8%

3.1% Chile 6.1%

5.5%
0.1%

Colombia 12.2% 1.5% 3.0% Country 2015 2016 2017 Mexico 5.8% 3.4% 4.7% Peru 0.0% 3.4% 3.0% Venezuela -12.4% -12.8% 0.0% Other Latam

0.3%

5.7% 2.5%

SLIDE 9

Long Term: External Factors to the Industry

Key challenges for the region:

− Promote industrialization. − Export diversification. − Stimulate Competitiveness: A level playing field. − Support Innovation and human capital development. − Increase value-added in supply chains and exports.

SLIDE 10

Key Variables: Competitivness & Per Capita ASU

Sample: 144 countries. In parentes 2014 Source: World Economic Forum

Per Capita 2015

World 208 South Korea 1.114 Japan 497 China 489 Mexico 191 Argentina 121 Brazil 103 European Union (28) 304 Asia 250 CIS 190 Latin America 122

Global Competitiveness Index 2016-2015 Country Ranking Switzerland (1) 1 Chile (33) 35 Mexico (61) 57 Colombia (66) 61 Peru (65) 69 Brazil (57) 75 Ecuador (-) 76 Guatemala (78) 78

Dom. Rep. (101)

98 Argentina (104) 106 Venezuela (131) 132

Source: Alacero, worldsteel

SLIDE 11

Long Term: Internal Factors to the Industry: Imports

Source: Alacero/ Chinese Custom Servise

4.3 4.5 5.5 6.3 9.3 9.4 17.0 15.3 16.1 15.7 14.7 15.0 20% 39%

10% 15% 20% 25% 30% 35% 40% 5 10 15 20 25 30 2010 2011 2012 2013 2014 2015

Chinese Imports ROW Imports Chinese Imports /Total Imports

SLIDE 12

Long Term: Internal Factors to the Industry:

In Process In Action

Total Against China Total Against China

TOTAL 19 12 53 37

Argentina 1 2 1 Brazil 4 3 16 13 Colombia 4 3 4 4 Mexico 6 3 27 17 Peru 2 2 Dominican Republic 1 1 2 Chile 3 2 1* 1*

Source: Canacero. Note: Includes products of chapter 72. 73 and Indirect Trade

Key challenge: Unfair Trade

SLIDE 13

VI) Final comments

The outlook 2016 - 2017:

The Excess Capacity issue: status quo or structural

adjustment?

Economic slowdown continues in 2016 and recovery is

postponed to 2017 (?).

The steel market remains weak and volatile.
Steel companies and their labor force are in a difficult

situation.

Several Political and social issues affecting the region.

SLIDE 14