Many regions throughout the world remain in some form of economic recovery, but are starting to see new supply chain challenges. Demand for exports is rising, particularly in agriculture, while material prices are also rising. This coupled with weak currencies in Latin America is creating cash flow challenges for raw goods importers.

As a result, more and more producers in Brazil and Mexico are turning to international traders to help find the best prices for quality raw materials and assist with cash flow. This month, we are watching our regular indices as well as data from China to help our customers make correct buying decisions.

Sign up to receive this newsletter directly to your inbox each month.

The economic recoveries of Brazil and Mexico from the coronavirus pandemic show striking differences in manufacturing activity expansion/contraction. Brazil saw its fourth consecutive month of strong manufacturing expansion while Mexico remains in a state of contraction, albeit at less drastic paces over the past seven months.

While Mexico’s capacity utilization fell month over month from 72.9 to 71.7, both Brazil and Mexico show significant increases since the low-point reached in April 2020.

Below is a chart showing August import levels for Mexico, and September import levels for Brazil and Chile. Weak currencies continue to negatively impact imports compared year-over-year, however, imports increased slightly month-over-month for all three countries.

Billet, HRC and CRC prices in China have steadily increased throughout the year as a result of increased demand for steel products for several large government-funded infrastructure projects.

Additionally, China’s steel exports have seen drastic declines from 2015 and 2016 levels as a result of global tariffs. The combination of these two trends – rising demand and falling supply – is putting upward pressure on global steel product prices despite slow economic recoveries in major importing countries, a trend Leeco Trading expects to continue into 2021.

Antonio Rosset, Commercial Director of Leeco Trading, regularly monitors important market indicators to help customers make strategic sourcing decisions and shares what he is watching in the 2020 market.

“Supply chain disruptions caused by the coronavirus pandemic are continuing to impact imports and exports in Latin America. Global demand for products exported by LATAM countries, such as soybeans and automobiles, is expected to continue to rise, which makes strategic material sourcing critically important in the coming months.”

Antonio Rosset, Commercial Director

Recent economic news points towards mixed economic and manufacturing activity across key regional markets.

Brazil is the world’s leading producer and exporter of soybeans, but rising domestic usage and record sales to China have drained supplies. The government has announced the suspension of import duties in an attempt to encourage imports and suppress rampant domestic food inflation.

Brazil’s economy will shrink by 4% this year, less than the government’s official forecast of a 4.7% decline, Economy Minister Paulo Guedes said on Monday, reiterating that this year’s emergency public spending will not morph into “inexcusable” permanent spending in coming years.

The latest data for Mexico suggest that the pace of economic recovery is slowing after a sharp rebound in June. However, the external sector is performing well, with Mexico seeing a record-high trade surplus as a result of increased exports amid higher US demand and decreasing domestic demand for imports.

The U.S. Chamber of Commerce and other trade groups are urging the Mexican government to remove from its 2021 economic package a “kill switch” proposal that would cut off internet access for businesses that fail to comply with Mexican tax law.