Brazil seen as next target for global steel overflow amid weak trade defenses

Key takeaways:

• Rising global trade imbalances and new EU import rules highlight the urgency for stronger Brazil steel import safeguards

• Increased Asian steel inflows expose weaknesses in current Brazil trade defense measures, threatening domestic mills

• Export challenges to the US and EU underline Brazil’s struggle to balance steel import safeguards with global competitiveness

Brazilian steel producers see the EU’s newly proposed import safeguard measures as a sign that the South American country should move swiftly to implement similar policies. This is amid a global market increasingly distorted by trade imbalances. “The measure increases the urgency with which Brazil must respond, seeking to make the application of trade defense mechanisms in the sector more effective,” Brazilian steel association Aço Brasil said in a note to Fastmarkets this week.

Strengthening Brazil steel import safeguards amid global trade shifts

On Tuesday October 7, the European Commission proposed a reform of its steel import safeguard system. This includes a 47% cut in tariff-free quotas and a 50% ad valorem duty on volumes exceeding those thresholds.

“This is yet another major global steel player resorting to a tough measure to try to preserve the ability of its mills to invest and generate jobs. This follows similar actions by the US and Canada,” Aço Brasil added.

Steel producers in Brazil echoed the association’s concerns. They pointed to a growing risk of steel oversupply being diverted into the domestic market.

“The EU is simply following in the footsteps of the US,” a producer source said. “After the US imposed 50% tariffs, Asian exporters – or what we call ‘opportunistic exporters’ – began targeting other destinations to offload their products. The EU was the next logical step.”

With fewer trade barriers in place, Brazil is increasingly viewed as a key destination for excess steel supply. This is particularly from Asia.

“Without a trade defense strategy that matches the seriousness of this global trade war in the steel sector, Brazil is becoming the preferred destination for steel sold below cost,” Aço Brasil said.

The growing need for stronger Brazil trade defense measures

Recent data from the association showed that imports were now eroding roughly one-third of Brazil’s domestic steel market. From January to August, imports of flat steel products rose by 30% compared with the same period in 2024. Aço Brasil forecasts a full-year increase of 32.2% – nearly three times the historical average.

“Brazil is far behind the rest of the world when it comes to trade barriers. Our public policy is practically against blocking imports. Mills are suffering because of that,” the producer source said.

From another perspective, import-reliant market participants are also concerned. These participants, who have historically benefited from cheaper overseas material, worry about Asian producers, mainly from China, redirecting all exports to Brazil.

“It’s not good for us either that production is diverted here at low prices. Even more anti-dumping measures will start to emerge,” a trader source said.

Recently, Brazil renewed and expanded a series of anti-dumping duties that now cover nearly all major flat steel categories.

“We are the only ‘backyard’ to which China has to send material. It seems that much more needs to be done about this,” Luis Fernando Martinez, executive director and board member of Companhia Siderúrgica Nacional (CSN), said in a press call in mid-August.

He was discussing the quota system that regulates the entry of steel into the domestic market. This is another Brazilian measure intended to curb imports at significantly lower costs.

How Brazil steel import safeguards impact export strategies

EU as a Brazilian destination

The EU’s proposed import safeguard measures were also a cause for concern among Brazilian producers. This is due to their potential effects on exports.

Since the end of Brazil’s exemption under Section 232 and the imposition of 50% tariffs on Brazilian steel exports to the US, domestic mills have redirected shipments to the EU.

“The US is not buying because of the tariffs, so Brazil sold to the EU, specifically to Italy,” said a second trader source on September 26.

“Since US demand is lower, Brazilian mills need to find other markets to redirect their shipments. They’re sending them to the EU, with Italy being the most in need,” said a second producer source the same day.

To maintain competitiveness in new markets, producers were also forced to adjust prices downward.

“For alternative markets,” a third producer source, “we’re lowering it by about $10 [per tonne] to increase market penetration.”

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