Mar 30, 2020
BRAZILIAN STEEL DEMAND TO PLUNGE 50% IN APRIL ON MONTH, 20% IN 2020: AÇOBRASIL
2020-04-01
Brazilian steel demand is likely to fall 50% in April from the previous month, as the spread of the coronavirus intensifies in the country, while the year-long steel consumption may end up shrinking about 20% from 2019, according to the Brazilian Steel Institute AçoBrasil.
Apparent steel consumption in Brazil totaled 20.6 million mt last year, a 2.7% decline from 2018.
As the effects of the coronavirus continue to ripple through the Brazilian economy, “a demand crisis” was mentioned by Marco Polo de Mello Lopes, president of AcoBrasil.
The group expects demand in the second quarter to retreat by 40% from the first quarter.
Following government announcements of quarantines and lockdowns, steel demand has vanished, with automakers introducing collective vacations and output shutdowns, while other industries reacted by canceling orders.
“In two, three, four days, orders started to be canceled. This came in a very fast chain reaction. Companies have to be concerned with cash,” Lopes said during an online press conference with journalists.
AçoBrasil said it wants a gradual return of activity under security protocols. “The wheel has to spin again,” he added.
Lopes said the current level of capacity utilization at Brazilian steelmakers was already below 60%, which could drop soon as all mills in the country are studying output reduction measures and furnaces shutdowns.
“For mills [to] keep up with production, they need steel demand, but also roads, ports operative. Moreover, If there is no raw material arriving at plants, if logistics are halted, there is also no delivery to customers,” he said.
Brazil’s crude steel production in 2019 fell 9% year on year to 32.23 million mt. It was the lowest figure since 2016, when the country produced 30.2 million mt.
Lopes said the prediction on demand decline was based on a scenario where things evolve in the second half. “The numbers could be worse than that if the situation doesn’t improve,” he said.
ALTERNATIVES?
“Increasing steel product exports would be the best alternative at this point for Brazilian steelmakers,” Lopes said.
AçoBrasil presented to the government a set of measures to support the economic recovery and said that among the requests are the Reintegra, which reduces the tax burden on the goods exported by Brazilian manufacturers to increase their competitiveness in the international market.
Reintegra was created with the purpose of recovering the amounts referring to the residual tax costs existing in the industries’ productions chains, reducing the tax burden on such production. The amount to be ascertained for the purpose of refund shall be calculated by applying a percentage that may vary on the revenue arising from the exports, depending on the exported good.
AçoBrasil said it is seeking an increase of that percentage for the steelmaking industry from 0.1% to 5%, “which would enable the sector to improve its export price by 7%, gaining competitiveness,” Lopes said, adding the claim had already been made about two months ago with representatives of the federal government.
“Brazil exports to over 100 countries,” Lopes said, after being asked whether steelmakers would find any appetite apart from their main customers in the US, Europe and Argentina.
AçoBrasil added that with a higher rate of Reintegra, steelmakers could increase their exports by 20%.
Exports by Brazilian steelmakers totaled 12.8 million mt in 2019, an 8.1% drop from the previous year, according to AçoBrasil. Semi-finished goods accounted for 8.66 million mt of the total exports, a year-on-year drop of 5.7%.
The 2019 exports of flat-rolled steel retracted by 13.8% year on year to 2.1 million mt, while long steel exports rose 1.1% to 1.7 million mt.
— Adriana Carvalho
Source: Eurometal
