#DigitalDialogue with Alejandro Wagner, Executive Director of Alacero - Asociación Latinoamericana del Acero
In this edition of our #DigitalDialogue series of interviews, we had the pleasure of speaking with Alejandro Wagner, the Executive Director of the Latin America Steel Association - Alacero. Alacero is recognized as a Special Consulting Organization by the United Nations and represents the Latin American steel Industry in international organizations such as Worldsteel, OECD, IDB, and among others.
Alejandro, how would you define Alacero and its value in the steel industry?
Alacero is a community, a meeting point, a coordinator to put problems and possible solutions on the table and execute many of them. Especially now, in these times where the problems are huge and of different kinds, it is no longer enough to simply manufacture steel efficiently and sell it, but we must do it by taking care of people, the environment, with ethics, with technological solutions.
The role of steel has now taken on a much greater importance, and it is going to grow more and more. Fortunately, the potential is enormous. I came from Europe, from the Annual General Meeting of Worldsteel where we were all the decision makers of the world, and I have more questions than answers. All the complexities that we face today in our sector worldwide, where LatAm is not the exception, on the contrary, adding all the uncertainties that our countries have, make it doubly challenging. Therefore, Alacero ends up making a transformation aligned with our role of bringing solutions to the table and coordinating action.
Could you tell us a bit more, about Alacero’s main objectives and activities, and how relevant Alacero is for the development of Latin America?
The topics on which our current agenda is focused are basically 4:
Sustainability, everything related to the environment, decarbonization processes, energy transition and climate change, better defined in the ESG. Our sector is one of the largest consumers of energy, but it is also a synonymous of economic development. Today, per capita steel consumption is still used as an indicator of a society's development. Now, how does this connect with sustainability, not only of the sector itself, but with the fact that we are going to need more and more steel and better steel (more sustainable and with a lower carbon footprint), because any electric car, wind energy solar panel, any machinery or lighter structure, etc. require steel.
Then we have the society or people topic. The companies in our sector have a very high industrial value and a high social and positive impact on the communities, generating not only direct employment but also indirect employment. When we talk about direct employment, Alacero has made a study of the impact on the quality of life of employees where we concluded that the level of remuneration and quality of these jobs are above average wages, because they are generally qualified employees who receive a lot of training. Another fundamental element of society is talent, especially the challenge of capturing and retaining talent today and in the future.
And that is where the third issue comes in, safety and health, not only physical but also mental. In fact, we recently launched the Health and Safety Committee at Alacero. Because of the pandemic, it became clear that mental health is as or even more important than physical health, so this Committee is going to focus on these issues.
We also have governance, perhaps one of the most complex issues in every sense. Mainly in companies listed on stock exchanges, it includes ethics, gender diversity, public works tenders, among other issues.
And finally, we have more traditional issues such as economics and markets. Steel is almost a commodity, it is a completely tradeable product. LatAm today consumes an average of 70 million tons of steel per year, of which approximately 65 million tons are produced locally and then there is a net balance of imports of around 10 million tons (20 million tons of imports and 10 million tons of exports). Therefore, since it is a product that is not only produced and consumed locally, but a product that is traded internationally and because it is a very sensitive product in terms of prices, supply, and demand, this makes the whole issue of geopolitics and economics very important.
How do you foresee the outlook of the steel market in the last quarter of 2022, and what challenges and opportunities are drawing mostly your attention?
In 2020, which was the strongest year of the pandemic, the annual drop in apparent steel consumption fell by almost 70% in some countries. Of course, some very important steel consuming industries, such as construction and automotive, stopped or had to operate under extreme conditions. The most delicate aspect was that the recovery was faster than expected. In Latin America, production falls per plant were between 20-70% and some plants stopped, but thanks to the recovery at the end of the year, the annual apparent steel consumption only fell by 10% compared to 2019. The world grew 1%. Almost all regions fell, except China. China grew 6-7% in the pandemic year.
In 2021, this recovery continued, thanks to the recovery of inventories and the growth of real demand, mainly due to tax incentives. In 2021, compared to 2020, Latin America grew 27%. The world was close to 0%. According to Worldsteel, it was one of the fastest growing regions in the world.
This year, since the Worldsteel Economic Committee in March, Russia's invasion of Ukraine had barely begun. We tried to forecast steel consumption for the year 2022 and 2023, and we estimated steel consumption growth globally of +0.4% and in Latin America +2.3%. In September we made a revision and this 2.3% is closer to a 5% drop in consumption. Many factors influence this new forecast, especially the war, the energy crisis in Europe, global and regional inflation, the consequent rise in interest rates and aggressive monetary policies to contain this inflation. The energy crisis in Europe is very worrying. USA also have their highest inflation in the last 55 years, and this is impacting local economies such as Mexico. So, in 2022, the world, which had estimated a steel consumption of +0.4%, we are already talking about a 3% drop and in Latin America almost 5-6%.
However, in Latin America, even falling 5-6% compared to 2021, we would be above pre-pandemic levels. We are talking about an annual steel consumption of 68-69 million tons. In 2019 we were at 66 million tons on average.
Alejandro, going back to the main topics of Alacero's agenda and more specifically the topics of sustainability and governance; how do you think technology and in general digitalization can help companies in LatAm ? Do you see some recent development in this topic?
We always say that digital transformation is cross. Cross to all processes, sectors, countries, etc. So, it is a phenomenal enabler. From everything I mentioned there is no relevant topic that is not easier with digitalization. We already have for example companies that offer devices to ensure labor safety in steel production processes. Metalshub is also an example of a technology at the service of the industry, a software that allows you to better and more strategically buy raw materials from companies, especially in this sector where buying well is one of the main pillars of good management, because margins are low and there is a lot of competition.
In terms of technologies for decarbonization, just last year, we wrote a document that we called the "Positioning of the steel industry in the face of climate change". Where we defined the medium- and long-term steps that the steel industry must take and explained the ecosystem needed for this process to accelerate and finally happen.
There are technologies that promote and accelerate the circular economy with increased scrap consumption. In general, technologies are catalysts. Companies were already buying metals or commodities before Metalshub came into existence, but you are facilitating, accelerating, and catalyzing processes. The discussion is no longer about what we must do, but when! Technology at the service of our industry and its decarbonization is fundamental!
Thank you, Alejandro, for taking your time to talk with us. We are happy to grow together.
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