An Industrial Overview
The first day of the ALACERO Summit 2024 featured Paolo Rocca as the keynote speaker, who highlighted the state of the steel industry in Latin America, emphasizing the challenges of economic fragmentation, deindustrialization, and unfair competition from China, as well as providing an overview of global decarbonization efforts.
“United States, Canada, and Mexico have taken a defensive stance regarding their industry, which is considered strategic, making good progress toward decarbonization. This allows for a higher price level than that of the global market. On the other hand, Europe and Japan maintain a defensive line, trying to protect their industries and promote decarbonization through subsidies and trade barriers that impose compensatory duties on steel imports and other sectors.”
“As for India,” Rocca continued, “it has consolidated itself as an emerging power that today represents 8% of global consumption and will double its production in 10 years, reaching 17% of the global market. India is taking advantage of its access to cheap coal, ignoring the pressures and costs of decarbonization. Meanwhile, China has already reached a level of consumption and production equivalent to 50% of global consumption and has not reduced its production, which has led to a surplus in the international market equivalent to 15% of the production of the rest of the world, at prices below its costs and directed toward countries without containment measures,” he concluded.
The Challenges of Productive Development in Latin America
In a context of growing economic uncertainty, productive development in Latin America faces significant challenges. Industrial fragmentation and limitations in value chains affect the region's ability to compete in a global environment.
In his speech, Rocca addressed these challenges and proposed the need for a renewed approach to foster sustainable growth and strengthen the role of industry in the Latin American economy:
“The context of fragmentation in our industry and our value chains in Latin America is even greater than in other regions. The region as a whole has experienced limited economic growth, and its economies, with the exception of Mexico, have become more primary, reducing the weight and relevance of the manufacturing industry. Fifteen years ago, the economies of Latin America, including Mexico, represented 8.9% of global GDP. In 2023, they represent only 7.3%. Per capita growth has been 10% overall, while in the United States it has been 25% and in Europe 15%. Over the last 15 years, the share of manufacturing in Brazil has decreased to just over 10%. A similar situation has occurred in Argentina and other countries in the region. Per capita steel consumption across Latin America has grown very little: from 114 kg per person to 119.”
To conclude regarding the challenges, Rocca emphasized the need for clear rules of the game, solid political governance, and better conditions for the development of the private sector.
China as an Agent of Economic Primarization in Latin America
Rocca then highlighted the impact of China on the primarization of Latin American economies, noting how its rise as an industrial power has reconfigured the commercial and productive landscape of the region. As it expands its influence, both opportunities and challenges arise that require critical attention and a strategic approach to strengthen local industry.
“China seeks new markets for its surplus productive capacity, strengthening its value chains in manufacturing and renewable energy. In this context, the growing dependence on China represents a risk for global supply chains, but Latin America has the opportunity to reposition its industrial value chains, especially in the steel sector, through strategic alliances with customers and suppliers,” he concluded.
Energy Transition: Building Trade Integration
The energy transition presents an opportunity for the manufacturing industry in Latin America, offering competitive advantages in addressing decarbonization and environmental impact.
“The energy transition and the need to decarbonize the industry can become a competitive advantage for production in the region, especially with reshoring opportunities. The support of local communities is crucial for the operational licensing of our plants. In a context of expansion and defense of the industrial sector, a transition can be planned that includes an increase in the use of electric arc furnaces and technologies such as carbon capture. These measures will help decarbonize current processes and strengthen the industry's position in the market,” he emphasized.
The Future of Latin American Steel
Looking ahead, Rocca proposed a key agenda for the steel industry in Latin America, based on strategic alliances, competitiveness, and sustainable development.
“The industry must form alliances among the links in its value chain, focusing on creating opportunities for the private sector, reducing the burden on the state, and fostering private entrepreneurship. It is essential to promote international integration toward markets with which we share values and principles, given that competing with China is not a fair playing field. Modernization and innovation of our processes are important to cover the range of the most demanding products required by our customers; incorporating digital tools to increase productivity and competitiveness of our companies; to facilitate vertical integration with our value chains.”
In conclusion, Rocca stated that “the gradual decarbonization of the productive matrix is fundamental, leveraging local competitive advantages to achieve sustainable energy. It is also important to pay attention to the communities where we are present, to reduce our environmental impact, gain their support, and contribute to their social, economic, and educational progress. Alacero, as a regional association, must lead an industrial agenda that strengthens competitiveness and facilitates access to global markets.”
Opportunities for Latin America in a Regionalized World
The first day also included welcoming remarks from Martín Berardi, president of Ternium Argentina, who emphasized that “we have a significant change in the international landscape. The world is becoming increasingly fragmented and regionalized, redirecting supply chains toward closer and more secure suppliers, more committed to the environment, with values and respect for market laws. We have moved from extreme globalization to marked regionalization. This represents an opportunity to reindustrialize our value chains. Our continent's production is dangerously becoming more primary. Regionalization, friend-shoring, or near-shoring is already altering not only trade flows but also new investments in our industry and throughout our value chain. There is an opportunity, and we must know how to seize it. We believe in the value of industry for the continent's development. Argentina faces profound changes with a macroeconomic 'reset,' presenting both challenges and opportunities. On one hand, we must regain competitiveness as a country. On the other, achieve smart reintegration with the world. By understanding the context correctly and consensually, we can make the best decisions as an industry.”
The event also included panels focused on key issues for the region. Ricardo Amorim, economist, moderated by Gustavo Werneck, CEO of Gerdau, addressed the competitiveness challenge for Latin America in light of China's growing influence, with a specific analysis of Brazil. Meanwhile, Andrés Malamud, a researcher at the Institute of Social Sciences of the University of Lisbon, accompanied by Berardi, explored the tensions between economic dependence, political autonomy, and social risks in the region. Additionally, Rafael Lucchesi, President of the Board of Directors of BNDES, moderated by Sergio Leite de Andrade, Vice President of Strategic Affairs at Usimina, delved into industrialization as a driver for economic and social development, again using Brazil as an example. Finally, a forum on decarbonization was held, focusing on the technological and environmental challenges the industry faces moving forward, with José Fonrouge, Global Sustainability Director of Ternium, as the moderator.