Posted on 05 Apr 2019
The automotive sector could be the main driver of any recovery in steel demand in Brazil if the construction sector does not pick up, said Diego Ocampo, senior director and sector specialist, Hard Industries Latin America, at S&P Global Ratings.
"We view the automotive market positively, and it may be one of the drivers, if not the main one, for any recovery in [Brazilian] steel demand," Ocampo told the S&P Global Platts Steel Markets Latin America conference in Sao Paulo. Thursday.
According to Ocampo, the question is when infrastructure and construction consumption will resume in earnest, relying so much as it does on the political situation in the country, given the continued uncertainty in Brazil.
"There's no sign of an infrastructure pick up," Ocampo said. "However, home building and car production are improving slightly."
At the same time, the investment perspective is not very positive in the short run in South America, according to Ocampo.
"We do not regard the prospects of Argentina positively, as it has been constantly hit by economic crisis, while Chile is a small market. Brazil is still waiting on a recovery to boost its demand," he said.
Ocampo said that since early 2015 domestic Brazilian prices have tracked international prices more closely, which kept a lid on imports.
"Domestic steel prices in Brazil have been really correlated to international prices in the past few years. The spread between the two is largely consistent," he said.
But "trade friction supports buoyant domestic prices and volumes," he added.
S&P Global Ratings believes that in the long term, steel prices will be driven by Chinese capacity cuts, which are expected to continue in the coming years.
