Latin America's steel sector stands at a crossroads, grappling with the challenge of primarization, a term describing the region’s heavy reliance on exporting raw and semi-finished materials. On August 6, 2024, Paolo Rocca, President and CEO of Techint Group, delivered a compelling keynote address at the Brazilian Steel Institute's annual congress in São Paulo. Rocca’s insights underscored the imperative for the region's steel producers to evolve beyond their traditional export model and embrace strategies that focus on value-added products and enhanced international collaboration.
Rocca emphasized that to overcome the constraints of primarization, Latin American countries and companies must forge stronger collaborations both within the region and with global partners. He stated, We need international operations that will allow us to reposition with the West. We have to work together with our clients. This vision aligns with the broader goal of transforming the region’s steel industry by shifting from the export of basic raw materials to the production of more advanced and valuable steel products.
Brazil, as Latin America’s largest steel producer, exemplifies the challenges faced by the region. Despite substantial investments in producing higher value-added steel products, Brazil remains largely seen as a commodity exporter. Rocca pointed out that while Latin American steel mills are competitive with Western and Japanese producers, they struggle to match the heavily subsidized Chinese steelmakers. The dominance of China in the global steel market, its share rising from 5% in 1995 to 35% in 2020, has intensified the competitive pressure on Latin American producers.
Mexico, in contrast, has successfully leveraged nearshoring strategies, particularly in the automotive sector, to boost its steel industry. This integration with U.S. industrial partners highlights the potential benefits of strategic international collaborations. However, Rocca noted that Mercosur, a trade bloc encompassing Brazil, Argentina, Uruguay, Paraguay, and Bolivia, has seen limited progress in achieving similar levels of regional integration. He specifically called for greater cooperation between Brazilian and Argentine steel industries to enhance the region’s competitiveness.
The challenges facing Latin American steelmakers are further exemplified by Ternium, which has faced significant obstacles due to a lack of regional cooperation. The company’s investment in Venezuela’s Sidor was undermined by nationalization and operational disruptions. Additionally, a recent legal setback involving a fine over an acquisition in Brazil reflects the complex regulatory landscape in which the industry operates.
In his address, Rocca articulated the need for a strategic realignment of Latin American steel industries to address the issues of primarization. By focusing on reshoring and enhancing regional and global partnerships, Latin American steel producers can better position themselves in the international market. As Rocca aptly remarked, We must fight the primarization of our economies and reshoring can help with that. This statement encapsulates the essential steps required for the steel sector to advance and thrive in a rapidly evolving global economy.
