By Jay Forte, Contributing Reporter
RIO DE JANEIRO, BRAZIL – Production of crude steel in Brazil is expected to reach 32.8 million tonnes this year, a decrease of 3.4 percent compared with last year, according to estimates by the Instituto Aço Brasil (Brazil Steel Institute). Domestic sales of steel products are expected to fall 15.6 percent to 18.3 million tons of steel.
The predicted consumption of the material in the country will be 22.3 million tons, down 12.8 percent, return to the level set in 2007. The decline in the automotive, construction and machinery and equipment, which account for almost eighty percent of the steel consumption in the country is the factor most responsible for the setbacks recorded by the institute.
According to the president of the Brazil Steel Institute, Marco Polo de Mello Lopes, the steel and manufacturing industries are experiencing the biggest crisis in its history, saying, “This is a very strong and different crisis from that of 2008 and 2009.”
The automotive production in Brazil fell by 25.6 percent in May 2015 in comparison to the same month the previous year and by 3.4 percent in relation to April of 2015, with the accumulated contraction from January to May at 19.1 percent. The decline in production is a result of the weak auto sales results for the first five months of the year, which were 20.9 percent lower than during the same period last year.
In February of this year a IBGE survey showed that the contraction in industry was of 9.1 percent since the year before, the lowest annual comparison since July 2009. The total for the first two months of 2015 shows a decline in industrial production by 7.1 percent. The construction industry has also been hit as prices remain high while consumer confidence dropped, and the real estate market has contracted.
The crude steel figures show that from January to June, production increased by two percent. Domestic sales fell 12.9 percent, apparent consumption fell 10.4 percent, while imports grew 4.3 percent. “Imports grew despite the appreciation of the dollar and expectations that, with currency fluctuations, there could be a rebound,” he said.
Lopes added that the structural and cyclical issues forced the industry to use its production capacity at a very low level. “We should be operating at eighty percent of installed capacity, but operate with 69 percent, far below what would be reasonable. […] It is unacceptable to allow an industrial area to be attacked by imports.”
He pointed out that there will be the dismissal of 11,188 employees and the suspension of 1.397 million contracts among the impacts of the crisis in the sector.