Posted on 11 Apr 2019
Slower economic expansion in Latin America could dent steel demand, in turn cutting coking coal demand in Brazil, the biggest destination for US met coal exports.
Latin American steel association Alacero has cautioned that slower economic growth in the region could affect the industry.
“Economic activity in Latin America continues to expand, but at a slower pace than previously expected, compromising the progress of the steel industry,” Alacero said.
Alacero cited the ongoing China-US trade war and tighter global financial conditions as factors underpinning the weaker outlook.
January saw Latin American steel output fall 1% on the year. Brazil accounted for over half of total output, lifting its production by 2%, Alacero said.
However, steel consumption in Brazil fell by 6% to 1.5 million mt in January from a year earlier, it said.
The weaker outlook could hit demand for coking coal in Brazil.
Brazil took 7.6 million mt of US met coal in 2018, up from 6.6 million mt in 2017, with strong demand for US high-vol and a range of low-vol and mid-vol coking coals shipped from the US East Coast and Alabama.
Argentinian imports of US met coal rose to around 625,000 mt in 2018, up from 520,000 mt in 2017, according to US Customs data.
Brazilian demand for US met coal is yet to feel the effects, with a supplier saying he had received additional cargo requirements.
Another US miner said uncertainty around iron ore supplies after the Vale mine disaster in Brazil at the end of January had not yet translated into slower met coal demand.
With lower steel prices in Europe in Q1, 2019 than in Q4, 2018, a US coal supplier said it saw a delay in agreeing prices and terms for some contracts into Europe, with more coal availability adding to buyers’ options. Brazil has been a bright spot for the US market, as it took more US coal and reduced Australian coking coal imports in 2018.
Infrastructure-related steel demand and stimulus in Brazil could be providing some support for met coal and met coke demand.
Brazil, which exports steel and slabs to the US, Europe and northeast Asia, is the only country in the region maintaining a trade surplus in finished steel, Alacero said, amounting to 214,000 mt in January.
