LATIN AMERICA LONG STEEL WRAP: Competition building to intense levels in Brazilian market

The long steel industry in Brazil is marked by fierce competition, but the rivalry among local mills seems to be increasing.

This was shown by the February announcement of the intended acquisition of Brazilian long steel producer Votorantim Siderurgia by ArcelorMittal’s Brazilian subsidiary.

The takeover has yet to be approved by the country’s competition regulator, Cade, but in a technical report published in September it recommended that the transaction be refused. Cade said that it would remove a relevant participant in a sector in which the three largest companies are responsible for more than 80% of the market supply.

The acquisition would threaten competition in at least eight product sectors – including wire rod, rebar, merchant bar and profiles – Cade said at the time.

Besides ArcelorMittal and Votorantim, CSN and Gerdau are the other major long steel producers in Brazil.

CSN, along with national scrap association Inesfa, has publicly opposed the acquisition and has presented arguments to the competition regulator to explain its opinion.

“The dominating economic rationality that motivated this operation… seems to be the elimination of the only competitor that, with the exception of Gerdau, is able to offer effective rivalry to ArcelorMittal,” CSN said in a petition filed with Cade.

According to CSN, ArcelorMittal owned around 35-40% of the country’s long steel market in 2015, while Votorantim Siderurgia controlled about 10-15%, with Gerdau having a market share of nearly 40-45%.

CSN itself owned 0-5% of the Brazilian long steel market in 2015, following the commissioning of its 500,000-tpy mini-mill in 2014.

“The [acquisition] will certainly result in a very high market concentration, [more visible] in a market that is already highly concentrated,” CSN added.

More recently, representatives of CSN and Inesfa said during a presentation in São Paulo, to explain the likely negative effects of the merger of ArcelorMittal’s and Votorantim’s long steel assets, that Gerdau is “indifferent” to the subject.

“Gerdau will benefit from the high concentration of the long steel market [in Brazil] because it will also have its scrap buying power increased [as will the company resulting from the merger of the ArcelorMittal and Votorantim assets],” an Inesfa representative said.

When contacted by Metal Bulletin, Gerdau said that it does not comment on third-party processes and that it conducts its relationships with its customers and suppliers individually and in compliance with ethical principles and current legislation.

Cade is scheduled to make a final decision on the merger by March.

Prices
After months of stability, Brazilian mills are said to be finally implementing price increases for their long steel products, including rebar, according to local sources.

Higher international steel prices, as well as more positive market sentiment in the domestic long steel segment, are said to be behind this upswing.

Initially, market rumors indicated that the price adjustment planned for November could go as high as 25%, but “a small figure is actually being applied,” a Brazilian long steel distributor said.

Should price rises be confirmed, they will be reflected in Metal Bulletin’s monthly price assessment for Brazilian domestic rebar on Friday December 8.