LATIN AMERICA LONG STEEL WRAP: Price rise rumors bolster Brazilian market

The Brazilian long steel market in February was marked by rumors of price increases and the approval, with restrictions, of the merger between ArcelorMittal Brasil and Votorantim Siderurgia.

Local mills are reportedly trying to raise prices for long steel goods – mostly rebar and wire rod – as a result of higher production costs and improved market conditions, especially recovering demand from the construction industry.

Sales of long steel products to the Brazilian domestic market grew by 17.30% year-on-year in January to 563,000 tonnes, according to figures released by national steel institute Aço Brasil last week.

Over the same period, Brazil’s long steel output increased to 730,000 tonnes from 720,000 tonnes, according to the association.

As a consequence, Brazilian producers Gerdau and ArcelorMittal have been trying to implement two-digit increases in their domestic long steel prices, Metal Bulletin has been told.

Gerdau has proposed price rises of as much as 20%, but consumers have indicated that they could not accept increases of more than 12%, according to local steel distributors.

These increases, however, have yet to be officially applied, they added.

Gerdau and ArcelorMittal do not comment on their pricing policies.

Metal Bulletin’s monthly price assessment for Brazilian rebar was unchanged month-on-month at 2,200-2,400 Reais ($679-741) per tonne delivered on Friday February 9. The new market prices for the products will be assessed by Metal Bulletin on March 9.

The effect on Brazilian long steel prices is one of the concerns surrounding the approval of the merger between ArcelorMittal and Votorantim Siderurgia.

Along with Gerdau, these firms are the major long steel producers in the country.

“The exit of players from such a consolidated market is a source of concern in terms of supply and pricing strategy,” one source said.

But ArcelorMittal Brasil said that the merger will not have any effect on Brazilian domestic long steel prices.

“Today, the market is very competitive and it will continue like that,” ArcelorMittal Long Carbon Central & South Americas chief executive officer Jefferson de Paula told Metal Bulletin in early February. “We did not have prices in mind when we closed this deal.”

The operation was approved by a majority in the administrative court of Brazil’s competition regulator, Cade, on February 7, and is conditional on ArcelorMittal agreeing to sell several assets, as well as taking on commitments about production levels.

But at the end of the month, Brazilian steelmaker CSN appealed the decision by Cade to approve a merger, arguing that the decision is “flawed” and requesting that Cade’s administrative court should take a new vote on the matter.

The appeal has yet to be analyzed, however.

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