Instituto Aço Brasil has revised its outlook for 2013 downwards because of weak growth in domestic demand. Crude steel production is expected to reach 34.5Mt in 2013, a figure similar to 2012. Brazilian steel exports are expected to be down 13% at 8.5Mt, versus 2012, but also direct imports of steel are anticipated to be 3.2Mt down -14.4%.
However, imports of goods with a high steel content showed an increase of 17.7% between January and July 2013, which results in a loss of market to the domestic industry. Domestic sales of steel are estimated at 22.8Mt this year, up 5.3% on last year, while apparent consumption is expected to grow 3.2% to 26Mt.
Direct and indirect imports of steel products impacted on the local steel industry and led to an operating rate at 70% of capacity, when, previously utilization of installed capacity has surpassed 85%.
The Brazilian Finance Minister, Guido Mantega, announced that the government will not renew the tax rates on imports established in 2012, a measure that will be detrimental to the steel industry in Brazil. According to Aço Brasil, the government’s argument that the appreciation of the US dollar offsets the impact of discontinuing the import duty is invalid because the currencies of major steel exporters to Brazil have also depreciated similar to that of the Real. Moreover, even when the dollar appreciation discourages imports (an argument used by the government’s economic area), it also increases the costs of the companies in the sector, as raw materials such as iron ore and coal have their prices quoted in US dollars.
While several countries are still suffering the effects of the global economic crisis and there is an over- supply of steel in the world market, the solution for Brazilian industry is in its domestic market. Its growth requires infrastructure investments and so-called ‘special projects’, and effective measures to alleviate the costs of production of locally made steel. A high tax burden makes Brazilian products more expensive and puts them under unfavourable conditions to compete, concludes Aço Brazil.