Brazil's steel industry gets gloomier

- Wednesday, November 30, 2016

Brazil's steel industry gets gloomier

Brazil's steel industry association IABr said it expects the country's apparent steel consumption to reach 17.9Mt this year, down 16.2% compared to 2015, and a level last seen in 2009.

The forecast compares to IABr estimates released in June of a 14.4% decline to 18.2Mt in apparent steel consumption this year.

Start your 15 day free trial now!

cta-arrow

Already a subscriber? Please, login

The trade group also made a downward adjustment to domestic sales and crude steel output forecasts for 2016, as the worsening political and economic climate, and negative systemic factors, impact the sector's competitiveness and its major customers.

Domestic steel sales are expected to reach 16.3Mt, a 10.1% decline. Crude steel production is forecast to fall 7.6% to 30.7Mt, IABr said in a release.

"The intensity of drops in performance indicators has been decreasing, showing that the worst is probably over, but it does not guarantee a vigorous recovery for steel in the country," the group said, adding that the convergence of cyclical and structural factors is still pressuring the sector.

"With the domestic market still very weak, the only path to growth in the short term is through exports."

The association believes boosting steel exports would be a way to improve the levels of capacity utilization, which is currently around 60%, but the sector is currently contending with international overcapacity exceeding 700Mt, which has led to unfair trade practices and depressed prices.

IABr is pushing the government to bring back the original format of the Reintegra tax rebate program, which was designed to bolster local manufacturers by reimbursing them 5% of the value of exports. Currently, the rate is just 1%.

In addition, the steel industry wants the federal government to introduce agile and effective trade defense mechanisms and to deny China, the world's biggest steel producer and exporter, market economy status, IABr said.

For next year the group predicts a 3.5% increase in apparent steel consumption and a 3.6% rise in sales.

OUTPUT

IABr said earlier this week that Brazilian crude steel production slipped 9.2% year-on-year to 25.6Mt in January through October. Domestic steel sales in the first 10 months totaled 13.9Mt, down 11.1% compared with the same period 2015.

Apparent domestic steel consumption reached 15.3Mt, down 17.6% from January-October 2015.

Home to the likes of Gerdau, Usiminas and CSN, Brazil is Latin America's biggest steel producer.

[GRAFICO:FIGURA:ID_900]