Manufacturing output is on the rise in Latin America, but shortages of key raw materials used in industrial production – such as car semiconductors and polymers – could impact supply chains in the region. As a result, many manufacturers are turning to international trading partners for support in sourcing the materials they need.

Leeco^® Trading is monitoring current market conditions and is prepared to help manufacturers source the raw materials they need. Contact our team today to discuss your material needs or request a quote.

Manufacturing PMI rose month-over-month in February 2021 for both Brazil and Mexico, with Brazil’s PMI driven by increases in new orders and output volumes. While Mexico’s PMI increased, it remains at a level of contraction for the 12^th straight month.

Capacity utilization slightly decreased month-over-month in both Brazil and Mexico during January 2021, but production levels remain strong overall.

Below is a chart showing February 2021 import levels for Mexico, Brazil and Chile. Imports to Brazil and Mexico slightly fell month-over-month, while imports to Chile increased.

Brazil’s car production fell 1.3% month-over-month in February, reaching the lowest production level since July 2020. Mexico’s car production fell 28.9% year-over-year in February as power cuts caused by a winter storm in the southern U.S. forced some automobile manufacturers to temporarily halt factory operations.

Brazil’s GDP shrank by 4.1% in 2020 according to statistics agency IBGE, marking the sharpest contraction since the 1990s. While Brazil had strong economic recovery in Q4 2020, it was not enough to offset losses from earlier in the year.

Leeco Trading’s Commercial Director, Antonio Rosset, provides insight on how shortages may impact raw material sourcing in Latin America.

“Some supply chains continue to face disruptions from the COVID-19 pandemic, which are prolonging shortages of raw materials such as polymers and semiconductors. As factory output rises in Latin America, it is more important than ever for manufacturers to seek a trusted trading partner to ensure they can source the raw materials they need during these shortages. Leeco Trading partners with trusted fine chemicals and metals suppliers across the globe and can help find a cost-effective solution for your material needs.”

Antonio Rosset, Commercial Director

Recent  market news points towards mixed economic outlooks in the Latin American region.

Brazil’s central bank increased interest rates to 2.75% during their mid-March meeting, greater than what many economists expected and setting the tone for another interest rate hike during their May meeting. Policy makers stated that an increase in rates was necessary due to rising inflation rates and currency depreciation.

The Inter-American Development Bank (IDB) stated that economic growth in Latin America and the Caribbean will likely remain weak in the years after the COVID-19 pandemic and that countries in the region must implement urgent fiscal reforms. The organization said that reforms to increase productivity, connect economies to the global supply chain and promote job creation are crucial for the region to achieve stronger rates of economic growth than anticipated.

Latin American polymer prices faced upward pressure in recent weeks as the U.S., which serves as the primary polymer source for the region, had limited available supply. The U.S. polymer shortage also drove prices of European and Asian imports up as demand for polymer from those markets increased. However, prices are expected to ease as U.S. polymer supplies recover in the coming weeks.

The Ever Given, which blocked the Suez Canal for nearly a week and disrupted global trading routes, was freed on March 29^th. Economists say the Suez Canal blockage likely won’t have a long-term impact on global trade and is unlikely to affect 2021 global economic growth. However, experts say that the blockage will worsen shipping container shortages in Asia and may temporarily drive shipping costs up. North and Latin America – which primarily rely on shipping container traffic through the Panama Canal – will likely be less impacted by the blockage than Asia and Europe.