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Brazil Metals Report Q3 2009Published by: Business Monitor International Published: Jul. 22, 2009 - 54 Pages Table of Contents
AbstractThe Brazilian government’s package of stimulus and trade protection will ameliorate the effects of thefinancial crisis on the steel industry, but the high value of the real is hampering recovery and the industryis set to witness a sharp fall in output in 2009 followed by a strong recovery thereafter, accord to BMI’slatest Brazil Metals Report.According to the country’s steel institute, IBS, in the first five months of 2009, Brazilian crude steeloutput fell 40.6% y-o-y to 8.63mn tonnes. Flats fell 43.4% year-on-year (y-o-y) to 3.64mn tonnes in theJanuary-May 2009 period, while longs fell 35.4% to 2.91mn tonnes. Although domestic demand declined,the appreciation of the real against the US dollar led to a 5.6% increase in total imports to just under928,000 tonnes due in large part to a 21.5% rise in the import of flat products to around 593,000 tonnes. Imports of semis were up 44.4% to just under 22,300 tonnes. In the first five months of 2009, Brazilianprimary aluminium output fell 5.6% y-o-y to 644,600 tonnes. Performance varied from producer toproducer. Novelis reported a 16.8% y-o-y rise in output in the January-May period to 42,500 tonnes dueto a 61.8% rise in production from its Ouro Preto smelter. Albras’s production was largely unchangedduring the period at 189,300 tonnes. However, Valesul produced no aluminium in May and its output forthe first five months was down 69.7% y-o-y to 10,800 tonnes. Meanwhile, total production at Alcoa’sBrazilian smelters site fell 11.4% to 135,600 tonnes and BHP Billiton’s production declined 4.8% to71,800 tonnes. Brazil is preparing to raise tariffs on steel imports, increasing rates of non-taxed products to 12-14% as ofJune 2009. Usiminas and CSN will benefit the most from the new tariffs, which are applied to hot-rolledcoil, cold-rolled coil, plates and alloy bars. The move will affect six types of flat steel, including threetypes of hot-rolled coil, two types of cold-rolled coil and heavy plate. Usiminas and CSN are the mostexposed to domestic steel prices, although ArcelorMittal and Gerdau will also enjoy the benefits ofgreater trade protection. The taxes will reduce the downward pressure on prices, with flats likely tobenefit the most. Overall, BMI does not believe trade protectionism will be sufficient to stimulatedomestic production and create a revival unless higher levels of growth are achieved in the constructionand automotive industries. Ultimately, growth will depend on the stimulation of domestic demand, with the Brazilian marketdependent on local producers for 80% of supply. A recovery in industrial output will depend on domesticdemand for cars and investment in large industrial and infrastructural projects. The Braziliangovernment’s increased investments in the country’s growth acceleration plan (PAC) - to BRL646bn(US$280bn) from BRL502bn - could significantly benefit steelmakers, particularly Gerdau. Despite the stimulus programme, BMI maintains a bearish outlook for steel with output forecast todecline 28.8% y-o-y in 2009 to 24mn tonnes. Hot rolled output will fall 28% to 18.51mn tonnes. Thegovernment’s stimulus programme should ameliorate the effects of the crisis on the construction industry. BMI believes the fall in output in rebar and wire rod will be mitigated, falling 22.6% and 22.3% to2.48mn tonnes and 2.47mn tonnes, respectively. The relatively strong performance reported by Novelisand Albras in H109 has prompted us to revise up our primary aluminium forecast from 1.25mn tonnes to1.54mn tonnes, a fall of 8% over 2008. Nevertheless, a strong recovery is expected from 2010 and by2013 crude steel output should reach 40.15mn tonnes (up 19% over 2008) and aluminium reaching 2mntonnes (up 20%). Production growth will be assisted by an increase in both demand and capacity. Get Full Details About This Report >> |
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