Gerdau CEO Considers Shifting Investments to US Amid Chinese Steel Influx

Gerdau CEO Gustavo Werneck revealed the company may soon invest more in the United States than in Brazil due to the “flooding of Chinese steel” into the Brazilian market.

According to Portal de notícias e análises de economia, this influx causes significant harm to the national industry and underutilization of the company’s production capacity.

“We are close to making that decision [to invest more in the US than in Brazil],” Werneck stated. The quota tariff mechanism implemented by the federal government last May has proven ineffective, with steel imports continuing to rise over the past 12 months.

Despite these challenges, Gerdau recently inaugurated an expansion of its hot coil mill in Ouro Branco, Minas Gerais, representing an investment of R$1.5 billion ($263.2 million). President Lula attended the ceremony alongside various ministers and the state governor.

Werneck emphasized that this substantial investment decision was made five years ago, before the current market situation developed. “We inaugurated equipment yesterday, and today we don’t have enough orders to keep it running,” he lamented.

The CEO highlighted the stark contrast in operational environments between the countries. In Brazil, Gerdau employs 123 people in its tax department compared to just three in the United States. The Brazil Cost burden reaches approximately 22% of GDP, around R$1.5 trillion ($263.2 billion).

Gerdau’s Strong North American Performance

Gerdau currently operates 11 production units across the United States and Canada and evaluates expanding capacity in Michigan and Arkansas. The company benefits from its established North American presence amid protectionist policies.

“These commercial defense mechanisms and programs encouraging local steel have benefited us and will likely continue doing so,” Werneck noted.

For 2024’s fourth quarter, Gerdau reported R$666 billion in profit with R$2.4 billion EBITDA. The CEO expects “very solid results” from North American operations in 2025.

Regarding shareholder returns, Werneck considers Gerdau shares “very cheap” at current multiples, prompting a share buyback program. The company maintains a balanced approach to profit allocation, paying R$0.80 per preferred share over the past year, yielding 4.6%.

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