The metalworking industry in South America: main obstacles

The metals industry is witnessing a period of low growth that has put pressure on prices and created uncertain demand in the industry. Coupled with a lack of supply chain visibility, price volatility, and overcapacity, this period presents some key challenges for the metalworking industry in South America.

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During the past few years, there have been fundamental changes since metal companies encountered challenges such as overcapacity due to the difficulty of competing with Asian countries, lack of supply chain visibility, and volatility in raw material prices. In the wake of restructuring, cost-cutting, and consolidation, the metalworking industry is looking for new ways to increase revenue. In addition, concerns about low growth levels and labor shortages present additional challenges for the industry in South America. Metals company executives must find ways to streamline operations, implement IT systems to improve supply chain visibility and focus on ensuring local suppliers remain competitive in the global industry.

Commodity price volatility

Metal companies are concerned about volatile commodity prices, and many see this volatility as their number one concern for years to come. Problems related to price volatility are especially prevalent in the metalworking industry, where the cost of iron has quadrupled and is expected to continue rising in the future. Price volatility in the metal industry is largely due to increased demand for iron in South America, as well as increased investment in new mining projects, increasing overall capacity. The reduction of bottlenecks in logistics infrastructure and the rising trend of resource nationalism in resource-rich countries have also contributed to the volatility of commodity prices. Ensure local supplies for input resources, raw materials, etc.

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Low growth puts pressure on prices

Low growth expectations in the metal industry have put pressure on prices and created uncertain demand in South American markets. These issues have presented metal companies with the challenge of finding ways to cut costs and structure their operations more efficiently. Low growth has also put pressure on companies to streamline their operations and focus on their core competencies. A focus on improving value and optimizing costs by reevaluating energy policies and restructuring asset management processes can help companies meet the challenges presented by uncertain demand during this low-growth cycle.

Labor shortages could increase costs by slowing production

Metalworking companies in underdeveloped and developing countries are experiencing a skills shortage as large numbers of workers are nearing retirement and young people are not being trained in core activities such as setting and die making. The long-term impact of this shortage could mean higher costs for metalworking companies due to less availability of efficient resources. To address this challenge, the metals industry in South America has been using staff from other sectors. However, this is only a short-term solution to a long-term problem.

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Going forward, addressing these challenges will be vital for companies looking to gain a competitive advantage in the metals industry. Increasing pressure on metal prices, uncertain demand, volatility in commodity prices, and a shortage of skilled labor has created significant challenges in South America during this period of low growth. While some temporary solutions have emerged, they are not enough to solve the long-term problems that many of these challenges present. Companies must focus their efforts on reducing cost structures and obtaining skilled labor. After emerging from a year of change and foundational consolidation, metals companies must remain vigilant and find solutions that can boost growth and improve their operations.

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How can technology contribute to this reality?

Without a doubt, technology has a fundamental role in the future of this industry. If human resources begin to be scarce, the first point will be to try to make said “production capacity” as efficient as possible, in such a way as to generate work cells that receive all the services that the industry needs; while in parallel, a revaluation of the professional is generated, who today must not only be a craftsman but must also develop management skills and use of computer technology.