Brazil’s average steel consumption will fall 19.8% in 2020 according to Paulo Wanick, CFO and Head of Strategy and Risks and Information Technology at ArcelorMittal Brazil.

South America’s largest country ranks second, only behind the United States, in the list of confirmed Covid-19 cases. More than 770,000 people have been infected with the new coronavirus and more than 39,000 have died, according to data gathered by John Hopkins University.

The pandemic has affected the market’s trust in the country, where the business confidence index has gone from 60.3 in March to 34.7 in May, according to the website Trading Economics. Along with the 34.5 registered in April, these are the lowest levels since 2015. GDP forecasts have worsened in the past few weeks and predict now a decrease of between 6% and 7% (and even 8% according to the World Bank) for 2020, as Wanick said.

Brazil is among the 10 largest steel producers in the world, but it is now seeing the industry’s utilisation capacity plummeting to 49% after five years of averaging 66%, making the sector’s situation look “poor” and “weak”, said Wanick.

ArcelorMittal’s 19.8% decrease estimation is due to an expected fall of 26% in flat steel products and an 11% reduction in long steel products. Before the pandemic, the company was foreseeing a domestic steel consumption growth of 5% in 2020, according to Wanick.

The firm now has a five-month inventory, much more than the less than three months it was storing at the middle of the first quarter of the year. “[At ArcelorMittal Brazil] we were producing around 60% of our capacity, which is 7.5 million tonnes, and today we are forecasting to produce by the end of the year around 4 million tonnes”, said Wanick.

The “real pain” for the Brazilian steel industry can be found at the automotive sector, according to Wanick, who gave some data about the impact of Covid-19 in Brazil’s vehicle production.

Less than 2,000 light vehicles were produced in April, far less than the 268,000 produced in April 2019. “Almost zero”, he said.

May’s production figures show a slight recovery, though: 43,000 vehicles. Another 112,000 are expected in June.

As Wanick explained, the domestic market is important in Brazil, a country where imports only sit at 10% and where the currency has been suffering a large devaluation this year.

BOLIVIAN METAL EXPORTS FALL BY 30%

Bolivia’s mining industry, which stands for almost half of the country’s exports, has also been hit hard by the new coronavirus.

Mining exports fell by 30% at the beginning of 2020, mainly due to the decrease in demand from China.

“What has happened in Bolivia is that all operations and mining activities were stopped in March, and in May, due to their importance, the government allowed operations to start again”, explained Jose Carlos Barroso, project manager at the Bolivian mining company Empresa Minera Yacuses.

“But this only applies to state-owned companies and cooperatives”, which in 2019 represented 8% and 39% of exports, respectively.

“Private companies have had additional problems, which refer to supply chain issues”, he added. “Since we are a landlocked country, we have to import. All our goods come from Chile and Peru. I would say 80% from Chile and 20% from Peru… That makes a major problem as far as logistics are concerned”.

Bolivia’s main mineral exports include tin, wolfram, nickel, manganese, silver, gold, zinc and lead. Although steel is not being produced in the country at the moment, the government has plans to start steel production in the border with Brazil by the end on 2021. The new project will have a capacity of 150,000 tonnes of laminated steel per year, according to Barroso. This would escalate with time until reaching 450,000.

What Bolivia does produce now is iron ore. Barroso explained that, although exports sit at only 100,000 tonnes a year, the country has one the largest iron ore reserves in the world: El Mutun, with an estimated 40-billion-tonnes reserve of this mineral. Something similar happens with lithium: the Bolivian region of Potosí has the largest reserves in the planet, but although the government has been declaring lithium exploitation a national priority for more than a decade, the country is still far away from reaching its goal of dictating prices in the lithium market.

Bolivia’s GDP forecast for 2020 is slightly better than Brazil’s: -5.9%, according to the World Bank. Presidential elections were delayed to September because of the pandemic. This, along with China’s reactivation, is to be an important factorsfor the industry’s recovery, as Barroso said.

ECUADOR RESUMES ACTIVITY

Ecuador has three steel mills with a production dedicated to the construction sector, said Juan Pablo Diaz, Latin America Director of Business Development at the Chinese company Farever Metallurgical Machinery.

These mills produced 50,000 tonnes of steel before Covid-19 arrived in Ecuador.

The first case of coronavirus in Ecuador was registered in February. Since then, more than 44,400 people have been infected and over 3,700 have died. Dramatic images of the city of Guayaquil were broadcast around the world showing people leaving their relatives’ corpses on the street because funeral homes couldn’t cope with the number of deaths.

Since then, other South American countries like Peru and Chile have surpassed Ecuador’s number of Covid-19 infections and deaths.

The lockdown and curfew imposed by the Ecuadorian government halted the economic activity, as Diaz explained: “Everybody stopped for around 60 to 80 days, which reduced production to levels of between 20% and 30% approximately”.

Diaz said that, even if “perspectives aren’t good”, a “recovery” can be started to be seen. “Most industries resumed in June, this is the month when companies are facing biological controls and are getting used to this new way of working”.

Most of his work nowadays goes to helping clients find a way to maintain consumption levels even if production has fallen.

“So the perspective for Ecuador is a reduction of 30% in consumption because GDP will be -9% or -8%. Maybe even -10%”, he said.

Nevertheless, Diaz advises companies to plan ahead for a small increase in prices and production by the end of the year.