Itaú BBA - Brazil`s Steel Industry: Still a Challenging Scenario Ahead

Sector Insights

< Volver

Brazil`s Steel Industry: Still a Challenging Scenario Ahead

agosto 5, 2013

We forecast slight increases of 0.5% in annual crude steel production and 0.6% in annual rolled steel production for 2013.

•           Low global growth and high inventories are constraining international and domestic steel prices, limiting profit margins in the Brazilian steel sector. 

•           A high tax burden hinders the competitiveness of the sector in Brazil and brings steel imports into the country. A measure in effect since January 2013 that establishes a single rate of 4% for the interstate Brazilian tax called ICMS on imported products is likely to reduce import incentives and boost domestic production. 

•           The devaluation of the Brazilian real is likely to be positive for the steel sector, which should also benefit from general industrial growth and faster progress on infrastructure projects. 

•           In light of this scenario, we forecast slight increases of 0.5% in annual crude steel production and 0.6% in annual rolled steel production for 2013. For 2014, we forecast increases of 2.3% and 2.2%, respectively. However, the risk of lower domestic activity growth in the coming quarters has increased in recent weeks, which could adversely affect the growth of the steel sector.

•           As the Brazilian steel companies are operating at low capacity utilization (with an average capacity utilization rate of 69% this year), some investments in additional capacity are being postponed.

 Please open the attached pdf to read the full report.

 



< Volver