SAO PAULO, Aug 12 (Reuters) - Usiminas and CSN, Brazil’s top two producers of flat steel, plan to ramp up overseas shipments of plates, slabs and other products as a way to counter waning demand in Latin America’s largest economy, the companies’ top officials said on Tuesday.
Usiminas, formally known as Usinas Siderúrgicas de Minas Gerais SA, will boost the share of exports in its sales mix to prevent an output slowdown at its mills, Chief Executive Officer Julián Eguren said at an industry event in São Paulo. Exports rose to account for 15 percent of Usiminas’ sales last quarter, up from 12 percent in the previous three months.
Earlier on Tuesday, Benjamin Steinbruch, the controlling shareholder and CEO of CSN, floated a similar idea in spite of the potential decline in profitability that boosting exports could trigger. An overvalued currency in Brazil could make it less profitable for CSN and peers to ship and sell steel products overseas, he added.
“We are already trying to” export more steel, Steinbruch said at the same event, adding “but you have the problem of the dollar at the moment since the real is overvalued.” “Even if the margins are lower we have to export at the moment to avoid stopping production.”
Archrivals for decades, both CSN and Usiminas are struggling to place their products in Brazil, where the economy is in its fourth year of sub-par expansion and the cost of maintaining idle mill capacity has become almost prohibitive. Mills at CSN, whose formal name is Cia Siderúrgica Nacional SA, are currently running at full capacity.
Shipments of flat and long steel in Brazil’s domestic market posted their steepest back-to-back monthly declines in almost five years during May and June. Analysts at Goldman Sachs estimate Brazil’s third-quarter domestic steel shipments will drop 8 percent for flat steel products, justifying the producers’ decision to turn to exports to avert cutting output.
Steinbruch also said that pricing conditions in the domestic flat steel market should “get better.” Price reductions could be possible in an environment of weak demand, such as Brazil’s current market, but they should “reach a limit,” he noted.
Some analysts have said, however, that local flat steel prices are stretched and may be bound to fall. Steel price premiums, or the difference between local and international prices, have receded recently from their highest level in about two years. (Additional reporting by Guillermo Parra-Bernal; editing by G Crosse)