SÃO PAULO ArcelorMittal SA expects sales at its long steel products operation in Brazil to grow by around 4 percent in 2013 following a year of unfulfilled expectations in the nations economy.
"Brazil has been growing less than we expected: Everyone talked about a 4-percent lift in gross domestic product (GDP) for 2012, but the growth was 0.9 percent," Jefferson de Paula, executive vice president and chief executive officer of ArcelorMittal Long Carbon Americas, told AMM sister publication Steel First in an interview.
"Our expectancy (for 2013) is that steel consumption in Brazil will grow by 4 percent and, as we want to maintain our current market share, were expecting a 4-percent rise in sales, too," he said.
Brazils economy began to cool right after de Paula was named head of the Long Carbon Americas unit in mid-2011.
Local GDP growth was 7.5 percent in 2010, driven by heavy governmental expenditures and strong foreign investment. But inflationary pressure pushed that down to 2.7 percent in 2011, forcing Luxembourg-based ArcelorMittal to freeze its flagship long steel project in Brazil for a second time. The $1.2-billion expansion at its Monlevade plant in Minas Gerais state had been resumed only a year and a half earlier.
"The project is still stopped, but weve been monitoring the market and will resume it once market conditions improve," de Paula said.
The uncertain outlook for the global steel market also hasnt encouraged expansion.
"The biggest problem in the steel industry continues to be (global) oversupply," de Paula warned.
And until general conditions improve, ArcelorMittals Monlevade expansion, along with most other long steel projects in Brazil, will likely remain on hold, he indicated.
But scrap looks to be a bright spot for ArcelorMittal, which has been investing in scrap processing equipment in Brazil in a bid to boost its network of scrap processors, de Paula said.
Meanwhile, Brazilian steel association IABr late last year called for a ferrous scrap export tax (amm.com, Nov. 27), drawing flak from Brazilian institute of iron and steel scrap companies Inefsa (amm.com, April 15).
"Im not in favor of closed economies, but we need to have equal, fair trading conditions," de Paula said, noting that in this sense IABrs plan is for a reciprocity measure.
There isnt enough scrap in Brazil, so long steel producers also need to buy third-party merchant pig iron to feed their furnaces, he said.
"Some 30 percent to 36 percent of our (furnaces) feed is pig iron," de Paula said.
Despite such challenges, ArcelorMittal Aços Longos Américas has been operating at high utilization rates, he said, noting that in Brazil and Mexico, the steelmaker has been working at around 90 percent of installed capacity vs. a rate of some 75 percent in the United States.
In other countries in the Americas, rates have been ranging from 80 to 85 percent, with an average of 86 percent for the entire division, de Paula added.
A version of this article was first published by AMM sister publication Steel First.