Steel Industry in Brazil Continues to Face Hard Times

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – One of the consequences of Brazil’s economic crisis is the postponement of investments and reduction of production and labor force in key sectors of the economy, as in the steel industry.

Since 2014 the industry has closed 83 productive units, extinguished more than 40,000 jobs and delayed investments worth up to US$3.2 billion, according to Instituto Aço Brasil.

According to the entity, which represents steel producers in Brazil, the country decreased its crude steel production by 9.2 percent and its rolled steel production by 7.7 percent.

“When you look specifically at the steel sector, you can see that the main demanding sectors of the raw material [automotive, machinery and equipment and construction] which together represent eighty percent of the consumption of the product, all, without exception, drastically reduced their activities,” the president of the institute, Marco Polo de Mello said in an interview to Agencia Brasil.

Data released last week showed that the country’s accumulated crude steel production in 2016 totaled 30.2 million tons, down by 9.2 percent when compared to 2015. Rolling steel production totaled 20.9 million tons last year, registering a 7.7 percent decline in comparison to the previous year.

Mello said that the economic crisis was brutal for all sectors, but especially the steel production sector due to the over-supply of the product in the international market. According to the executive world steel production today totals about 780 million tons, of which more than 400 million comes from China.

Mello also notes the fact that the crisis has directly affected the value of steel company shares in the stock market. “The position of sector companies with shares in the stock market collapsed. If one looks at Gerdau, Usiminas, or CSN one can see that these companies, which were worth about R$110 billion each in 2008, had their value plummeted to around R$8 to R$12 billion,” concludes Mello.

For Mello, the short-term outlook for the sector is not optimistic. “The measures that have been taken by the government are insufficient,” he said during the interview. The solution, according to the head of the institute would be to increase exports.

For that, says Mello the government needs to reduce some of the sector’s tax burden to give steel companies more competitiveness to fight in the international market.