China will continue to have a very important presence in Latin America, and efficiency in steel production will be one of the main tools to continue fighting Asian imports, Kallanish hears from Gerdau chief executive Gustavo Werneck at the Alacero summit in Buenos Aires.  

During a panel discussion on the future and opportunities for the regional development of the steel industry, Werneck urges the promotion of fair competition.

“Latin American governments have been slow to adopt effective measures to combat unfair imports. There is a debate that needs to grow further for measures to be implemented to fight this unacceptable situation,” Werneck says. “As steel companies, we have the capacity and the technology to compete on equal and fair terms. We are far away, but we will continue the battle to show that, by creating fair competition, the steel industry in LatAm can be very relevant on a global level.”

According to the executive, innovation is one of the tools to improve the region's growth prospects, along with artificial intelligence.

“Innovation is great, but the problem is how to make it solve the big problems in the steel business. For me, one of them is job security. At Gerdau, we had inefficiencies that generated 20% of the costs. Innovation for innovation's sake is useless. We have to direct it towards industry 4.0, artificial intelligence and algorithms so that we have a cost standard like we have never seen before,” Werneck observes.

According to Jefferson De Paula, the president of ArcelorMittal Brazil and executive chief of ArcelorMittal Aços Longos e Mineração LatAm, technology, innovation and artificial intelligence are tools to be more competitive in quality, performance, sustainability and safety.

“There is no future without R&D to be more competitive. In China, there is a lot of talk about public subsidies, but they are used in a very good way, having high-quality companies. We visited the largest autonomous container port in the world. We spent three hours there and we didn't see a single operator. And they had 150 people working in research and development,” De Paula observes.

The manager believes that in Latin America one should be ‘cautiously optimistic’ about the development of the steel industry. “The sector in Brazil and mainly in Mexico is showing a higher level than in other countries in the region with very strong investments. There is a potential for growth in per capita steel consumption. We are a competitive sector that must continue to invest in technology, in cost reduction, to be competitive and have high value-added products,” he explains.

According to De Paula, the goal of reaching zero emissions will be extended beyond 2050. ArcelorMittal has 14 research centres around the world working towards its decarbonisation goals, in which the company plans to invest $10 billion globally. “We will not reach carbon neutrality with current technologies. There are transition stages. When a blast furnace reaches the end of its life, which is when it produces the most emissions, we must go to EAFs and then hydrogen use. It is a long process,” De Paula points out.

In Europe, where ArcelorMittal has 35% of its operations, governments have announced investments of up to $78 billion in sustainability. According to the agreements signed with France, Germany and Spain, for the reduction of CO2 emissions, the investment will be shared equally, a formula that is unlikely to be applied in Latin America.

“We do not see how Latin American governments will be able to follow the European example. This is a serious issue. In Latin America, many customers do not ask us what our path to decarbonisation is. The whole society has to think about it. The steel industry has no margin of profitability to reach carbon neutrality by 2050 with its own resources,” De Paula concludes.

Ternium ceo Maximo Vedoya contends that the decarbonisation process is an important investment cost in Latin America.

“If in Europe it is being done with many subsidies, in other countries it is not. This process has to be a global effort, not only for some countries and regions. Latin America emits very little CO2 compared to the US, Europe, China or India,” Vedoya observes. “Between China, Vietnam and India, they are building blast furnaces with very large emitting particles. They are going to be competitors in an unequal market with us, emitting much more CO2. We cannot demand decarbonisation when the rest of the countries do not follow the same path and do not have the same commitment. In LatAm, we emit a third of what industries do in other regions,“ Vedoya explains.

He expects that competitiveness among different regions, the US and China, will deepen. “It's not that the Chinese are bad at producing steel, but they do it with subsidies and a very aggressive policy of industrial domination. You can compete with other companies, but not with a state like China. Even Vietnam is applying anti-dumping measures to Chinese steel,” he adds.

In Vedoya's opinion,  Brazil, Argentina and Colombia are a step behind the political and economic development that Mexico has experienced in recent years.

“Mexico has an industrial vision. Argentina is undergoing an economic process after a very complicated situation. There is a reset. I believe that many things are being done well and others need to be analysed to achieve economic growth. The so-called ‘cepo,’ the exchange control system that regulates the US dollar price, does not help industrial growth. Certainly, we need a better defence of industry against China and unfair trade in Argentina,” he estimates. Brazil, as the industrial powerhouse of Latin America, saw the share of this sector in GDP fall from 30% to 10%, but “its industry still can be a factor in the North American value chain,” Vedoya adds.