Brazil’s Gerdau to invest R$1 billion in specialty steel in Brazil

RIO DE JANEIRO, BRAZIL – Gerdau will invest R$1 billion (US$17 million) in its specialty steel operation in Brazil. According to Rubens Pereira, the unit’s vice-president, the company will invest the funds between 2021 and 2022 to increase the production capacity of this type of steel – used mainly in the automotive industry – and in modernizing its operations.

Investments will be made in the three company units in the country: Charqueadas (RS) and Mogi das Cruzes and Pindamonhangaba (SP). “Most of the investments will go to Pindamonhangaba in the new continuous casting, which will produce ‘cleaner’ and stronger steels,” said the executive.

Pereira informed that the new equipment in Pindamonhangaba is scheduled to start operating in August 2022 and, with it, Gerdau will secure a more automated process with better yield.

“It is a type of steel that we call clean steel, which is fundamental for prolonging the life of a bearing, for example. We produced this type of product, but what we will start manufacturing with this investment is a more durable steel,” added the executive.

In Mogi das Cruzes, he said that Gerdau will reactivate the melt shop, whose operation had been paralyzed since March 2019. The resumption should occur in early September, according to the executive, and 150 more people will be hired for the operation. With this mill, Gerdau will have an annual capacity of 180,000 tons.

Last year, the steel mill produced 661,000 tons of specialty steel in Brazil. The estimate for this year is 880,000 tons, which may reach 1 million tons once the mill is at full capacity, said Pereira. In all, Gerdau’s Specialty Steel division produced 1.42 million metric tons last year, adding its units in the state of Rio Grande do Sul.

At the Rio Grande do Sul unit, Pereira pointed out that Gerdau will invest in increasing the productivity of steel bars. A new annealing and spheroidizing furnace will be installed, which will produce steel with higher hardness levels and more resistance.

“These investments are necessary to prepare the company for the growth in demand in the medium term, in four or five years, in the automotive, machine and equipment, and wind power sectors,” said Pereira.

According to the executive, the automotive sector currently represents 70% of Gerdau’s specialty steel sales. This percentage should remain for some time, despite the low utilization of installed capacity of automobile plants in the country, which is about 5 million units per year, Pereira added. Last year, the installed carmakers manufactured around 2 million units, and the estimate for 2021 is to assemble around 2.5 million vehicles.

“The big challenge in the business is precisely to create avenues for growth. We have a strong link to the automotive sector. There is currently perspective for growth, not only in vehicles, but in machines and equipment and wind power plants,” said Pereira.

The executive pointed out that the wind power segment can double its participation in up to five years. Today, sales to wind power plants represent 3% to 4%. “Wind has a potentially growing demand, it is an important avenue. The evolution of machinery and equipment will hinge on how competitive Brazil can be in the world market. If exports increase, this sector has good growth perspectives in the medium term,” said the executive.

Pereira took over the specialty steel operation in the country in late 2020. The executive has a degree in electronic engineering from the Technological Institute of Aeronautics (ITA) and an MBA from MIT Sloan School of Management.

Source: Valor