Brazil's Steel Market: Survey Signals Price Stability Amidst Low Imports and Demand

18 Oct, 2023

Brazil's Steel Market: Survey Signals Price Stability Amidst Low Imports and Demand

In October, participants in the Brazilian steel market anticipated sluggish demand and slow business activity. Domestic steel mills were actively lobbying the government to raise import tariffs significantly, possibly up to 25%, from the current level of approximately 9.6%. This appeal comes in response to a considerable 40% surge in steel product imports this year, particularly from China. It's worth noting that Brazil had reduced import taxes on various industrial products in 2022.

Surveys among market stakeholders revealed that 38% of respondents foresaw a potential decrease in local steel prices compared to September, while 19% indicated the possibility of price increases.

The steel price index for October registered at 52.50 points, marking an increase of 3.09 points from the previous month. This reading surpassed the 50-point threshold for the first time since June. In the context of this index, readings above 50 are considered bullish, while readings below 50 are viewed as bearish, with 50 indicating a neutral sentiment.

On October 13th, Platts, a division of S&P Global, assessed Brazilian hot-rolled-coil at Real 4,000/mt ($788.95/t) ex-works. This was notably higher than the price of Chinese HRC delivered to Brazilian ports at $681.61/mt after customs clearance. Platts factored in a freight rate of $46.79/mt and an exchange rate of Real 5.07/$1.

Platts also reported that the weekly price of Brazilian 10 mm rebar remained stable for the 11th consecutive week, at Real 3,700/mt ($729.78/t) ex-works, excluding taxes. Brazilian rebar prices maintained a 5.5% premium over imported rebar, which was delivered at $691.91/mt to Brazilian ports after customs clearance.

Regarding finished steel inventories in the supply chain, 75% of respondents anticipated stability in levels compared to the previous month, while 19% foresaw a potential increase. The index reading reached 63.75 points, reflecting a 6.1-point increase from September.

In terms of inventory turnover, 50% of respondents estimated it to be around 30 days, while 21% assessed it to be over 40 days, and 29% believed it was below 20 days.

Brazilian basic pig iron prices slipped by 0.4% at the end of September, reaching $403.50/mt FOB due to reduced demand. Despite a decrease in production, higher offers failed to find willing buyers.

Export prices for Brazilian ferrous scrap also fell at the beginning of October, with limited purchases from steel mills and foundries putting pressure on recyclers in the domestic market.

Approximately 31% of respondents expected a reduction in finished steel production in Brazil in October compared to the previous month, while 50% hoped for production stability. The index reading was 53.75 points, slightly higher than September's 52.94.