Import restrictions help steel distributors gain momentum in Brazil

Daily sales of flat steel by distributors in Brazil hit a record in June, marking the best monthly performance since at least 2015. This strong result has led the sector to forecast a 3% growth for 2024. According to data released by the National Institute of Steel Distributors (Inda), distributors sold 16,900 tonnes of flat steel per day in June, a 19% increase compared to the previous year. In 2015, the sales volume was 12,300 tons.

Inda’s president, Carlos Loureiro, highlighted that June was a recovery month for both steel mills and distributors. This improvement is attributed to price increases and the expectation of further adjustments. Additionally, a new tax policy, which imposes a 25% import tax on products exceeding government-set quotas, has prompted mills to announce price hikes for August. Gerdau and CSN have raised their prices for flat products by 7% to 8%. There is no information yet on whether rivals ArcelorMittal and Usiminas will follow suit.

With these adjustments, the “premium” for steel produced in Brazil compared to imported steel is currently 12% to 13% for hot-rolled coils. However, including the import tax, this premium drops to zero, potentially allowing the mills to increase prices further. Analysts at Bradesco BBI predict that imports will continue to decline. “Especially because the (import) quota for the current period – June to September—has been almost completely filled for most products,” the analysts noted.

According to Inda, import quotas for galvanized and galvalume sheets were filled between 80% and 100% by the beginning of last week. Similar levels were reported for some types of hot and cold coils.

Imports

In June, Brazil’s flat steel imports fell by 13.3% compared to May but showed a 5% increase compared to June last year, reaching 211,170 tons, according to Inda. In the first half of the year, imports grew by 22% to 1.28 million tons.

“But the peak percentage variation (of the accumulated total) has already started to fall,” said Loureiro, referring to the 26% expansion from January to May. This volume includes imports by national steel mills, such as CSN, which imported around 300,000 tons of steel in the first half of the year.

Loureiro stated that sales of flat steel in July “will be well above July of last year,” making the “expectation of 3% growth (in 2024) seem very feasible.”

According to Inda, the forecast for July sales is 333,600 tons, 7.5% higher than the amount recorded a year earlier but 1.5% below the 338,700 tons in June.

The sector, responsible for about a third of the consumption of steel produced by Brazilian mills, ended the first half of the year with stocks of 929,500 tons, an increase of 9.4% over the previous year, equivalent to 2.7 months of sales. The largest stock expansion occurred in galvanized materials, with volumes rising by 30.2% to 133,100 tons.

Source: Diário do Aço

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