Brazil’s flat steel distributors report 11% increase in August sales

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Inda members purchased 378,000 tonnes of flat steel products in August, an increase of 14% over the previous month.

Distributors’ inventories remained unchanged in August at 964,000 tonnes, back to normal levels.

Inventory levels, however, amounted to 2.5 months’-worth of sales in August, down from 2.8 months’-worth of sales in July.

Local demand for heavy plate improved last month, but inventories remained high at 4.5 months’-worth of sales, totalling 178,000 tonnes.

Heavy plate shipments amounted to 39,500 tonnes in August, up by 19% month-on-month, while distributors’ purchases increased by 34%, to 42,000 tonnes, according to Inda’s figures.

Pricing power still pressured
Despite the deteriorating global steel environment, fundamentals for local steel market participants have improved significantly in recent weeks.

This has been fuelled principally by the recent increase in import tariffs, lower energy costs, normalised inventories and improving local demand, Barclays Capital analyst Leonardo Corrêa said in a report on Thursday September 20.

“Nevertheless, we maintain our view that local steel pricing power should remain pressured during the second half of 2012/13, especially in the automotive and industrial segments,” he noted.

Corrêa believes that several investors holding flat steel stocks are now expecting a broader increase in import tariffs in the new list expected to be announced by the government in October, including cold rolled coil and hot dipped galvanized coil, and significant price hikes into 2013.

These price increases are predicted to be above 10%, “which we consider highly unlikely” to be effective, the analyst concluded.

Inda expects flat steel sales and purchases to decrease by 10% month-on-month in September.