SÃO PAULO Flat steel prices from Brazils Cia. Siderúrgica Nacional SA (CSN) to its domestic market are expected to increase 5 to 8 percent sequentially during the second quarter, according to commercial executive director Luis Fernando Martinez.
"We see room for further price increases in the Brazilian market in the second half of this year, as the premium (the difference between domestic and import tags) in the country is at 10 percent at the moment," he said May 16 in an earnings conference call.
Global steel producers will increase their prices starting in July in an attempt to "survive," Martinez said. "Mills have been recording net losses, and there are two measures to take to overcome this situation: reduce costs or increase sales prices."
CSNs net income plunged to 16.3 million reais ($8 million) for the three months ended March 31, down 82.4 percent from 92.6 million reais in the same year-ago period, despite a 6-percent increase in revenue to 3.64 billion reais ($1.79 billion) from $3.44 billion reais.
The steel and iron ore producer cited an increase in its costs of goods sold and lower iron ore shipments for the drop in net income.
During the first quarter, CSNs average selling prices were 1,550 to 1,620 reais ($761 to $795) per tonne for hot-rolled coil, 1,920 to 1,980 reais ($942 to $971) per tonne for cold-rolled coil and 2,200 to 2,300 reais ($1,079 to $1,128) per tonne for hot-dipped galvanized coil, Martinez told analysts.
CSN again turned to buying slab from third parties in the first quarter to maintain its finished steel output levels, the company said.
CSN bought 118,000 tonnes of slab during the period vs. 137,000 tonnes in the fourth quarter of 2012 due to maintenance at its melt shop.
In turn, CSNs slab production for the quarter was affected by a problem at one of the two reclaimers at its Casa de Pedra iron ore mine in Minas Gerais state.
"The quality of the iron ore (from Casa de Pedra) got worse and we are forced to use more coke and pellet, which made our slab output costs very high in the first quarter of 2013," Martinez said. "Thus, we have decided to purchase slabs in the market to offset these conditions."
CSNs slab output costs might return to normal in the second quarter, to about $500 per tonne, Martinez said. "We do not expect to buy more slab cargoes this quarter."
Iron ore output at Casa de Pedra started to return to normal levels in late April.
CSN is maintaining its iron ore export target for 2013 at 29 million to 30 million tonnes, mining director Daniel dos Santos said.
Iron ore shipments, all of which were exported, fell to 4.14 million tonnes in the quarter from 6.69 million tonnes a year earlier.
A version of this article was first published by AMM sister publication Steel First.