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Usiminas: US recession unlikely to affect global steel production, consumption - Brazil

Published: Tuesday, May 13, 2008 15:34 (GMT -0400)

By Claudio Mendonça, 

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The economic slowdown in the US is not expected to affect the global steel market or Brazilian steelmakers, according to Renato Vallerini, director of sales to external markets for Belo Horizonte-based integrated steelmaker Usiminas.

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"Risks in the American economy are not likely to inhibit new investments worldwide," Vallerini said during a presentation at the Coaltrans 2008 conference in Rio de Janeiro. In fact, the short to medium-term scenario looks very favorable for investments in steel mills around the world, he said.

During his speech, the Usiminas executive praised China as being responsible for giving the industry a much needed boost in 2002. Today, he said, China consumes 34% of the world's steel output.

"China rescued the steel industry from stagnation six years ago," said Vallerini. "If it weren't for China and other Asian countries, steel production in the rest of the world would have been insignificant. China should continue to drive growth in the global industry."

Vallerini pointed out that 25% of world production is in countries with low production costs.

The Usiminas director added that global steel production should continue to rise but annual growth rates are due to gradually diminish in coming years. "Production should go up 6% in 2008, 5.5% in 2009, 5% in 2010 and also 5% in 2011," he said.

HURDLES

Vallerini also spoke about the industry's challenges. Some concerns are with input prices which have soared lately. "Iron ore, for example, should reach US$100/t in 2008 compared to US$80/t in 2007 and US$70/t in 2006," he said.

Another challenge is how to cope with rising transportation prices. In May, shipping prices were roughly US$84/t compared to US$49/t in January, a 71% increase.

As for Brazil, despite being surpassed by India in recent years, the South American country should remain among the top 10 steel producers in the world.

"Brazil has competitive advantages to become a major supplier of semi-finished products," he said. "There is still plenty of room for growth in Brazil."

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