Business / Industries

Finished steel products perk up on LatAm boost

By AMY HE (China Daily) Updated: 2014-08-12 11:21

The nation exported 4 million metric tons of finished steel to Latin America in the first half of 2014, making the region the second-biggest destination of Chinese exports as China-Latin America trade continues to grow.

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Finished steel exports to Latin America from January to June increased by over 65 percent from the quantity exported during the same period in the previous year, according to SteelGuru, a metals commodities research website.

Brazil, Mexico and Chile were the main destinations for China's steel, and flat products-sheets and coils of metal products-make up 67 percent of China's exports to Latin America, SteelGuru said.

"The flow of Chinese steel to the world continues to grow steadily, a trend that gets even more marked in the case of Latin America. The region accounts for 5 percent of the world's finished steel consumption. Latin America currently represents 11 percent of the Chinese exports of such products and its share grew by 2 percentage points (from 9 percent) from the last year," the website said.

For the last decade, China sourced many of its needed raw commodities from Latin America-iron ore from Brazil and copper from Chile-but now the reverse is happening with Latin American countries relying on steel in large quantities from China, much of it due to Latin America's urbanization, said Erik Bethel, managing director at Darby Private Equity, the private equity unit of Franklin Templeton Investments.

"The infrastructure needs that Latin America has are enormous. Brazil in particular is building ports and rail lines and all sorts of infrastructure that require a lot of steel. Brazil acutely realizes the infrastructure shortfall that they have, and as a result, they need more steel," Bethel told China Daily.

The steel is being used predominantly in infrastructure, railways and the auto sector, Bethel said. Countries in Latin America used to source steel domestically since there were a number of steel mills in Brazil and Argentina but have since turned to importing products from China. Conversely, an excess of steel in China is driving companies to tap overseas markets, he said.

"Right now, China has a glut," Bethel said. "Steel mills in China have excess capacity, and Latin America is a natural market. The amount of steel imported by Latin America, especially from China, has grown exponentially. That's really a new phenomenon, and it's driven by an excessive amount of production in China over the last two or three years."

Though experts have said that China is on track to meet its 7.5 percent GDP growth target for 2014, the economy has slowed down, impacting infrastructure and property development and weakening domestic demand for commodities like steel.

Exports to foreign countries are helping offset the glut, and with Latin America, free trade agreements between the two regions are helping expedite Chinese exports and foreign direct investment into the region as well, Bethel said.

Finished steel products perk up on LatAm boost

Finished steel products perk up on LatAm boost

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