The Latin American steel industry's recovery, anticipated for 2022, is now expected in 2023 due to the pandemic and the war in Ukraine. With inflationary pressures, currency restrictions, and political uncertainties, 2022 proved challenging for the sector, leading to a drop in demand and a regional apparent consumption decrease of 9.5%.
The steel sector in Latin America, which was forecasted to bounce back in 2022, now eyes recovery in the year 2023. The impact of the global pandemic along with the ongoing conflict in Ukraine has played a significant role in dampening the expected resurgence. In 2022, the region faced multiple economic headwinds, from inflationary pressures to currency constraints and political uncertainties that contributed to a subdued performance in the steel industry.
From May 2022, the devaluation of Latin American currencies became a central issue. Coupled with the dollar's appreciation and the repercussions of the Russia-Ukraine conflict, there was a general decline in raw material prices. However, concurrently, the Latin American industry experienced a moderate fall in demand. The apparent consumption in the region, which had increased by 25.8% in 2021, showed a 9.5% decrease in the first eight months of the following year, expected to close at 67.8 million metric tons in 2022. This brings the region's consumption per capita back to the average levels seen between 2018 and 2019 at 105 kilograms.
Despite these challenges, Latin America displayed resilience, consuming 46% of the global average steel per capita during this period. Meanwhile, the global consumption is projected to shrink by only 3.7% in 2022, slightly lower than the pre-pandemic average. The anticipated recovery for the region, expected mid-2022, is now forecasted to commence from 2023 onwards, with a modest increase of 1.7%.
Political uncertainties also loom as potential barriers, potentially disrupting the implementation of essential structural reforms needed within the region. As we step into 2023, there is heightened vigilance surrounding the prospects of diminished global growth and less favorable financial conditions. A slow normalization from the post-pandemic supply chain disruptions is expected to bolster growth in steel-consuming sectors. Thus, the most significant challenges for the Latin American markets in 2023 include rising inflationary pressures, further currency restrictions, and political uncertainties.
Another factor impacting the steel sector's performance is the continuously increasing cost of gasoline throughout 2022, affecting public transportation, government budgets, and agriculture. Oil prices spiked further in late February due to the Russian invasion and subsequent Western sanctions. Higher energy prices put pressure on government budgets as politicians attempt to mitigate price hikes through price controls, tax reductions, or increased subsidies. These policies can have downsides, including diverting funds from other social expenditures. Therefore, the rise in energy prices has differentiated impacts across countries in the region, depending on their energy trade balance positions, refining capacities, and domestic pricing advantages.
In terms of production and consumption, data from Alacero, the Latin American Steel Association, indicate that in November 2022, crude steel production reached over 4.9 million metric tons, which is 8.8% less than the previous November and 6.5% lower than the preceding month. The production of rolled products also saw a slight dip compared to the previous year's figures. Trade data shows that while imports of rolled steel declined, exports saw a significant increase compared to the same period in the previous year.
The steel industry in Latin America has shown remarkable resilience despite the challenges of 2022. With the delayed recovery now projected for 2023, the industry looks forward to overcoming the hurdles of inflation, currency restrictions, and political uncertainties. As the sector grapples with these issues, the anticipated slow but steady normalization may pave the way for growth in steel-consuming industries, promising a potential for rebound and stability in the near future.