According to the report “China – Latin America Monitor” issued by Alacero –Latin American Steel Association- for the first quarter of 2013, a new trend might be arising when destinations of steel flows from the Asian country to the region are considered. Traditional destinations such as Brazil could begin to give ground against the growth of new ones such as
Venezuela or Colombia.
During the first quarter of 2013, Latin America received 8% of Chinese finished Steel exports, reaching 952 thousand tons, 9% more than the same period of 2012.
Main destinations continued to be Brazil (160 thousand tons), Chile (154 thousand tons) and Peru (148 thousand tons) that accounted for 48% of the received finished steel.
However, the key highlight of the analysis is the marked growth of Chinese finished steel imports reported for Venezuela (+113%), Colombia (+76%) and Dominican Republic (+252%). Meanwhile, other countries such as Brazil, Mexico, Cuba and Argentina showed a decrease in their imports.
This is a trend that, if incipient, might begin to signal what could be described as a new path for Chinese exports to Latin America, where flows would be quitting Brazil to expand in new destinations such as Venezuela and Colombia.
The rise of China as a supplier of finished steel in several countries is a worrying phenomenon. The entry of these materials (produced by state-subsidized companies and –in most cases- introduced in conditions of unfair trade) affects intra-regional trade and erodes Latin America industrialization project, a cornerstone for the sustainability of the region.
In Brazil, the downward trend in steel consumption (it fell 2% in Jan/Mar 2013 vs Jan/Mar 2012) brought about a drop of finished steel imports. Nevertheless, while Brazil´s imports from all over the world fell 18%, those from China decreased more markedly by 39%.
In the first quarter of 2013, Chinese imports reached 160 thousand tons, 21% of Brazil´s finished steel imports from all over the world.
The decrease of Brazil´s participation in Chinese finished steel market mix can be traced to 2012, when its share fell from 27% to 17% of the exports to Latin America. It is worth noting, however, that despite this drop the trade relationship between both countries remains strong.
Venezuela, on the other hand, shows an inverse phenomenon. This country almost doubled its imports of finished steel when the first quarters of 2012 and 2013 are compared, reaching 109 thousand tons. Venezuelan production continues to fall and local demand is increasingly supplied by imports.
Chinese imports growth in Venezuela can be traced throughout 2012 and continues in 2013. The progressive strengthening of this trade interrelation is eroding the relationship between Venezuela and its Latin American trade partners.
In this regard, it is relevant to point that China Minmetal Engineering Company is evaluating a partnership with Orinoco Steel to reinforce production of hot-rolled flat steel and to develop new casting capacity of 550,000 tons for round billets, according to an article published by UPI last February.
The following graph shows how China became a key supplier for Venezuela, accounting for 41% of the imports the country received during the first quarter of 2013.