Market conditions in key Latin American countries remain uncertain. While manufacturing demand is increasing in Brazil and Mexico, continuous supply chain constraints and weakening economic outlooks could impact industrial output and production costs.

The Leeco Trading team is ready to help manufacturers in Latin America source the raw materials they need, when they need them and navigate market challenges. Contact us for a quote today.

Manufacturing PMI increased month-over-month in both Brazil and Mexico during September. Brazil’s manufacturing output expanded at a moderate pace, and demand conditions remained favorable. Mexico’s manufacturing sector marked 19 straight months of contraction.

Capacity utilization remained unchanged month-over-month in Brazil during August. Capacity utilization in Mexico, however, decreased month-over-month during August.

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

Car production levels varied across key Latin American countries during September. Car production in Brazil rose 5.6% month-over-month, reaching the highest production level in four months. However, car production in Mexico fell 13.9% month-over-month, reaching its lowest level since May of 2020.

The annual inflation rate increased in both Brazil and Mexico month-over-month during September. Brazil’s inflation rate reached its highest level in five years due to global supply issues and weakening currency. Mexico’s inflation rate moved further away from the central bank’s 3% target range, despite three interest rate increases.

Leeco Trading’s Commercial Director, Antonio Rosset, shares his insights on how economic uncertainty could impact how manufacturers source raw materials.

“Elevated inflation in the Latin American region is leading manufacturers to carefully consider where they source raw materials from, as material and good costs are on the rise. Sourcing raw materials internationally can help manufacturers control production costs amid rapidly changing market conditions. The Leeco Trading team partners with quality raw material producers across the globe and can help customers source the materials they need, when they need them.”

Antonio Rosset, Commercial Director

2021 Dubai Steel and Raw Materials Hybrid Conference

Antonio Rosset will be a speaker at the 2021 Dubai Steel and Raw Materials Hybrid Conference, which takes place from December 7-8. Interested in watching his presentation? Register for tickets here.

Recent economic news points towards weakening economic conditions across key regional markets.

Economic activity in Mexico fell 1.6% month-over-month from July to August in seasonally adjusted terms, something that analysts found concerning. While demand for goods remains high, economists say that supply chain constraints, weak business confidence and policy uncertainty will likely weight on the industrial sector for a while.

On October 27, Brazil’s central bank voted unanimously to raise interest rates on a 150-point basis to 7.75% as the country continues to handle double-digit inflation. The central bank signaled that it will also make another interest rate hike later this year as they adopt one of the most aggressive fiscal tightening cycles.

The Brazilian real weakened 1.3% to 5.61 per dollar on October 28 after Brazil’s central bank announced its highest interest rate hike in nearly two decades. Economists believe that the central bank will need to take more aggressive measures to control inflation rates, as the pace of consumer price increases remains high. Analysts remain concerned about Brazil bringing inflation to target in 2022 and 2023 amid the growing risk of a recession next year.

Retailers and manufacturers are overordering or placing orders for goods too early due to ongoing supply chain issues, which experts say could worsen supply chain constraints. According to analysts, overstocking is causing distorted demand at the level of raw material suppliers, which is causing the supply chain crisis to continue.