(Adds detail on mill output)
By Guillermo Parra-Bernal
SAO PAULO, July 13 (Reuters) - ArcelorMittal SA's Tubarao steel mill, Brazil's largest by output, is operating at full capacity as clients in Asia and North America buy more slabs, the steelmaker's most senior executive in Brazil said on Monday.
Profit margins have widened due to greater cost dilution, Benjamin Baptista, ArcelorMittal's chief executive in Brazil, said on the sidelines of an industry conference in Sao Paulo.
Arcelor re-activated a third furnace last year to reach full capacity with the company taking advantage of the weaker real to export more steel.
With the weaker real and the plant operating at full capacity of around 7 million tonnes of steel slabs per year, the mill can compete with Russian rivals that are currently the lowest-cost producers in the world, Baptista said.
About 40 percent of the additional 2.5 million tonnes per year of slabs produced by the third furnace is going to Arcelor's operations outside Brazil, with the rest being placed with third-party clients in Asia, Europe and North America, Baptista said.
Despite Tubarao producing at full capacity and the help of a weaker real, Baptista said the outlook for demand on Brazil's domestic steel market remained gloomy.
"We are witnessing a worrisome phenomenon: the sector is paying the price for this downturn, and we still don't know if we have reached bottom," he said. "There's so much uncertainty." (Reporting by Guillermo Parra-Bernal; Editing by Chris Reese, Bernard Orr)