SÃO PAULO, Brazil The ongoing margin squeeze in the global steel industry coupled with an overvalued currency and rising inflation in Brazil have severely affected the Latin American nations slab exports.
Prices for the semifinished product have been "very low" in the international market, with no expected near-term recovery, ArcelorMittal Tubarão chief executive officer Benjamin Baptista told AMM sister publication Steel First May 9 on the sidelines of the 24th Brazilian Steel Congress, organized by the countrys steel association, IABr.
"I wont tell you our sales prices, especially because weve developed some specific markets over the past years," Baptista said when asked about current price levels for slab. He confirmed, however, that prices of commodity-grade slab in the international market have been below $500 per tonne f.o.b.
"This is the level of the regular slab, but since our production has been low, weve been focusing on more special products," Baptista added.
ArcelorMittal Tubarão has been producing only 500,000 to 600,000 tonnes per year of slab for export, in spite of having a surplus slab capacity of as much as 3.5 million tonnes per year, the executive told delegates earlier at the conference.
"We were the largest slab exporter in the world, selling as much as 5 million tonnes per year," he said.
For about 20 years, slab sales were "very profitable" for the company, with average earnings before interest, taxes, depreciation and amortization (Ebitda) of $150 per tonne of sold slab in the 2005 to 2010 period, according to Baptista.
"Ebitda reached as much as $280 per tonne in 2008those were good times," he said.
From 2010 onwards, however, Ebitda in the Brazilian slab export business has been negative.
"Thats why we decided to stop our No. 3 blast furnace at the end of last year," Baptista said.
The steelmaker has now been producing some 4.6 million tonnes per year of slabs, with 4 million tonnes per year feeding its hot-rolling facilities.
Low slab prices in the global market, which led to a margin squeeze in the steel industry, is one of the reasons for the cutback, Baptista said. The over-valued Brazilian currency is another key factor, he said. Inflation in Brazil in recent years has also had a significant impact on steelmaker costs, the executive said.
Located in Espírito Santo state, ArcelorMittal Tubarão has installed capacity to produce 7.5 million tonnes per year of crude steel and 4 million tonnes per year of hot-rolled coils.
A version of this story was first published in AMM sister publication Steel First.