Private Construction and Infrastructure Boosting Argentina’s Steel Industry
November 14, 2017
Argentina's Acindar steelmaker is currently working at 70% of its installed capacity, which is 1.7 million metric tons of crude steel and 1.4 million mt of finished steel. In 2016, Acindar produced 962,000 mt of steel products. Expectation for 2017 is that it will reach 1.1 million mt, resuming good levels for the company.
According to the company's international relations spokesperson Facundo Velasco, 2015 elections changed the economic model of Argentina, and 2016 was a transition year in which the country had very low levels of production, shipments and activities. “So if we analyze 2017 comparing year on year, all comparisons should be positive because Argentina is mostly returning to regular levels,” he said.
“We're also seeing construction boosting our shipments and activities in 2017, with very good figures, especially private construction. With the general economy running smoothly, housing resumed as an option for investment,” Velasco said.
Demand stemming from the reactivation of public works and infrastructure development impacted shipments. “Infrastructure and public works began in the end of 2015 and took almost the entire 2016 to leave bureaucracy and plans, so in 2017 we're finally seeing demand for steel,” he said.
Regarding domestic prices, Velasco said Acindar sets them in a range between international market, domestic demand and the “Argentine cost” -- labor, logistic, tax. “Argentina lacks competitiveness compared to other markets, freight in the country is almost as expensive as importing the product,” he said.
However, the spokesman said domestic prices also reflect movements in China, which sets the steel agenda worldwide.
“If prices in China increases, then imports decreases and that creates room for increases in the domestic prices, because we have the advantage of having the product ready to ship instead of waiting three months to receive it.”
Regarding Vaca Muerta shale deposits development, Acindar does not expect it to be a game changer for long steel products.
“It will increase punctual long steel for housing and infrastructure in the region, but not yet, we have to wait for 2018,” the spokesman said.
Around 65%-70% of the company's output is directed to the construction sector, 15% to general industry and the agriculture sector, while the rest is directed to exports.
CEO Jose Giraudo also said the company bets on private construction for 2018 and infrastructure investments from the government.
“For 2018 we'll not have a 15% growth, but we're aiming for 7%-8%, and in a very positive perspective, 10% year on year,” he told.
Acindar suspended its steelmaking operations at the Villa Constitucion mill on July 25, 2016, and resumed operations during August, aiming to reduce the company's overloaded steel inventories.
Acindar had already halted operations in the first half of the year, attributing it to a decline in shipments, which forced it to adjust its production level. Acindar's five plants are in Santa Fe, Buenos Aires and San Luis provinces, and produce rebar, wire rod and sections.