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Gerdau upbeat on US auto, energy markets

Keywords: Tags  Gerdau SA, North AMerican operations, 2013 steel market outlook, SBQ, special bar quality product, auto market, energy market, Corinna Petry

CHICAGO — Gerdau SA provided a conservative yet positive outlook for North American steel demand this year, citing two key end markets.

"The United States should continue to present good demand, particularly in the sectors of energy and automotive. With the increasing exploration in the shale gas reserves, the industry expects to grow as the cost of energy will become more competitive," chief financial officer André Pires de Oliveira Dias said during the Porto Alegre, Brazil-based steelmaker’s Feb. 21 earnings call.

"There is a slight improvement in construction, but the figures are still below historical numbers. For 2013, it is expected that (U.S. gross domestic product) will grow by 2 percent. Steel consumption should improve by 3.6 percent, reaching 100 million tons," Pires de Oliveira Dias said.

Production of light and heavy vehicles throughout the United States, Canada and Mexico reflects "a warming-up of demand," and he projected additional growth in automotive output this year.

For Gerdau’s North American operations, fourth-quarter production dropped 15 percent, but the bulk of that was in merchant, rebar and structural products. "In the U.S., when it comes to specialty steel (special bar quality, or SBQ), the decrease was only 3 percent," he told investors.

"What we see is that this is an industry that is still very strong. We are still producing close to 90 percent of our (SBQ steelmaking) capacity in North America," Pires de Oliveira Dias said.

As demand eventually rebounds, Gerdau’s North American capacity across all long products mills will rise to the 80- to 85-percent range, he predicted.

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