Gerdau’s American Advantage: A Double-Edged Sword in the Steel Industry

Gerdau, a Brazilian steel company, faces an unexpected challenge in its American operations. The company’s strong presence in the United States, once considered a major asset, may now become a liability.

This shift comes in the wake of recent developments in the American steel market. Nucor, a prominent American steel producer, has made a significant move.

The company announced an immediate price reduction of $120 per ton on most of its commercial and structural products in the United States.

This decision reflects the intensifying competition from cheaper imports in the American market. Itaú BBA, a financial institution, has highlighted the potential impact of this price cut on Gerdau.

The bank’s analysts have conducted preliminary estimates to assess the situation. They suggest that a price reduction of $50-100 per ton in Gerdau‘s North American business division could have serious consequences.

Such a price drop could lead to a corresponding decrease in Gerdau’s EBITDA per ton in the region. This change might result in a 4–8 percentage point reduction in the company’s EBITDA margin for its North American operations.

Gerdau’s Market Challenges

The potential annual EBITDA loss could range from $200 million to $400 million. These figures represent a significant portion of Gerdau’s projected earnings.

The estimated loss accounts for 9% to 17% of Itaú BBA’s official forecast for Gerdau’s consolidated EBITDA in 2025. This potential setback underscores the volatility of the steel market and the challenges of international operations.

Despite these concerns, Itaú BBA maintains an optimistic outlook for Gerdau. The bank continues to recommend Gerdau’s stock as “outperform.”

In addition, they have set a target price of R$25 for 2025, suggesting a 31% potential increase from the closing price on Thursday, October 10.

This situation highlights the complex nature of global business operations. What was once considered Gerdau’s strength—its exposure to the U.S. market—may now present challenges.

In short, the company’s ability to navigate these market shifts will be crucial for its future performance and investor confidence.

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