SÃO PAULO Gerdau
SA has been working with Brazilian steel institute IABr on the
formulation of a ferrous scrap export tax.
"Gerdau went with IABr to the
government demanding this (export tax)," André Gerdau
Johannpeter, chief executive officer of the Porto Alegre,
Brazil-based steelmaker, said in a meeting with investors and
analysts in São Paulo.
The aim is to impose the tax on
exports to countries that themselves have export restrictions,
"In China, the export tax (on
scrap) is 40 percent; in India, 20 percent on average; in
Russia, 20 percent to 30 percent," Johannpeter said.
And in some countries, such as
Argentina, Indonesia and Uruguay, exports are entirely
prohibited, he added.
"Our demand is reciprocity,"
Johannpeter said. "If these markets dont allow exports,
or impose restrictions, why should we have no restrictions (in)
Figures from Brazilian foreign
trade secretariat Secex show that most of the countrys
ferrous scrap exports go to countries with such restrictions.
Exports reached 345,912 tonnes in the first 10 months of the
year, of which 143,975 tonnes went to India, 27,290 tonnes to
Indonesia and 17,255 tonnes to China. In the corresponding 2011
period, exports totaled 206,774 tonnes, of which 69,893 tonnes
went to India, 1,009 tonnes to Indonesia and 18,764 tonnes to
Scrap represents a high
proportion of the costs for Brazils long steel producers,
and there is insufficient material available locally. "In
Brazil, scrap is limited. There is no surplus in the country,
so 15 to 30 percent of melt shops charge is made up by
pig iron," Johannpeter said, adding that scrap represents 40 to
50 percent of Gerdaus raw materials costs in Brazil.
However, scrap collectors and
processors have argued that exports are an alternative for them
to get higher prices and avoid being totally dependent on local
purchases by Gerdau, ArcelorMittal SA and Votorantim
Siderurgia, Brazils three principal long steel
Inesfa, Brazils institute
of iron and steel scrap companies, recently told a local
newspaper that an export tax would enable local steelmakers to
limit the pricing power of the scrap companiesmainly
small, family-based firms in a fragmented market.
Barclays Capital Plc analyst
Leonardo Corrêa said in a recent report that, apart from
the reasons put forward by IABr, the export tax could also be
"an attempt to maintain current control of domestic
"The local scrap industry has
been trying to develop an export channel in recent years to
partially mitigate the differences in local bargaining power,"
he said, noting that there are only a few large scrap buyers
and a very wide base of small scrapyards.
A version of this article was
first published by AMM sister publication Steel First.