BNamericas quoted Mr Marcos Assumpção analyst at Itaú BBA as saying that steel imports to Brazil could fall by as much as 50% in 2011 as compared to 2010 thanks to a reduction in the gap between local and international prices to around 10%.
In 2010, imported steel accounted for some 25% of domestic apparent consumption, leading to a build up in local stocks and creating tough competition for local mills, largely as independent traders sought to take advantage of price arbitrage.
Mr Assumpção said in Rio de Janeiro at a conference organized by CRU that while imports are a new reality for Brazil, domestic steel prices are now around 7% higher than imported steel, once the imports have paid freight, port fees, insurance, taxes and other expenses.
He added that "When you go much higher than 10% you start to stimulate imports, which is what happened last year."
Not including the taxes and costs, steel prices on the global market are some 40% to 45% lower than in Brazil. The catch to reducing imports into the market is that local steelmakers must learn to live with lower profit margins, as production costs are on the rise.
He said that Brazil is no longer a country of low cost steelmaking but rather a medium cost producer and steelmakers will not likely be able to reverse their loss in profit margins, adding that the sustainable margin figure for Brazilian steelmakers will be closer to 20% than the 30% seen in the past.
Brazil produced 32.8 million tonnes of crude steel in 2010, while apparent consumption amounted to 26.6 million tonnes.
( Source: www.steelguru.com )