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Producing Steel

for the World


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Brazil’s steelmaking industry is ranked

as one of the world’s most competitive,

in terms of modern advances and volume

of output. Brazil is the world’s ninth

largest steel producer, accounting for

50.2% of Latin America’s production and


2.9% of the world total. Technological
innovation, product development, processes

and managerial methods are all factors

contributing to the country’s highly

competitive steel producing capacity.

B
razil’s first steel mills were built in the 1930s, when large
proven reserves of high-quality iron ore were known to
exist. The first integrated mill was erected with foreign
and national financing, and set an example that has persisted through-
out the development of Brazil’s steelmaking industry.
Expansion of national steelmaking capacity reached its peak dur-
ing the 1970s and 80s. Up until the mid-1970s, Brazil relied heavily
on imported steel. This was a time of accelerated industrial expansion,
primarily under government control, intended not only to meet grow-
ing demand but also to lessen reliance on imports. Beginning in 1981,
Brazil became a net exporter of steel.
Production based on partially government-owned companies be-
came less and less attractive as the government—itself controlling 70%
of the nation’s manufacturing capacity—suffered erosion of its abil-

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ity to invest during a period of intense technological development in
steelmaking worldwide. The alternative—to avoid compromising plant
productivity and competitiveness—was to transfer that capacity to pri-
vate industry.
Open-auction privatization began in the late 1980s and was con-
cluded in 1993, with a national installed capacity of 28,000,000 metric
tons. Following that privatization, from 1994 through 2004, the indus-
try invested $13 billion—mostly for technological upgrades, eliminat-
ing production bottlenecks, improving the mix of products offered and
providing environmental protection.
Brazil’s installed steelmaking capacity, among the most advanced
in the world today, comprises 25 mills, 11 of which are integrated (be-
ginning with iron ore mining), and another 14 are mini-mills (recycling
ferrous scrap feedstock), administered by seven corporate groups.
Integrated mills currently account for 74% of all Brazilian steel
production, with mini-mills producing the remaining 26%. Total Bra-
zilian installed capacity amounts to 36,000,000 metric tons of crude
steel per year, 94% of which is produced by strip casting. Brazil is
the ninth largest producer in the world, accounting for 50.2% of Latin
America’s production and 2.9% of global steel production in 2005.

Brazilian Steel Production

In thousands of tonnes
2001 2002 2003 2004 2005
Crude Steel 26,717 29,604 31,147 32,909 31,631
Steel products* 25,790 27,873 29,119 30,555 29,202
*Rolled and merchant semifinished shapes.

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Investments in technology: Operation room of
Cosipa, Cubatão, Minas Gerais.

Central to Brazil’s steelmaking industry development has been the


purposeful tracking of market trends and the requirements of steel-con-
suming sectors. This made it possible to meet 95% of domestic demand
on competitive terms, as can be seen not only in direct exports, but also
exports of such steel-intensive industries as automaking, heavy appli-
ances and capital goods.

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Sectorial Distribution by Apparent Consumption

Steel consumption patterns in Brazil are not very different from


those in more industrialized economies. Although per capita steel con-
sumption is low (91 kg per person), Brazil has a well-developed in-
dustrial infrastructure in such industries as automaking, auto parts,
durable consumer goods in general, and capital goods.
Brazil’s steelmaking industry fully supplies domestic demand and
has been a strong exporter since the 1990s, with over 40% of its pro-
duction placed on the export market. Brazilian exports are heavily
weighted toward semifinished shapes (slabs and billets). Products such
as these, intended for processing in mills abroad, have in recent years
accounted, on average, for over half of the industry’s total exports.

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Siderurgy process: ingot smelting of
Gerdau Açominas, in Ouro Branco, Minas Gerais.

Steel Product Exports

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Steel products from Brazil are exported to over a hundred coun-
tries, making the industry one of the nation’s most important in terms
of the balance of trade. Exports in 2005 totaled 12.5 million metric
tons of steel worth $6.5 billion.

Steel Export Target Markets - 2005

Brazil’s steel industry is ranked among the most competitive in the


world. Besides its modern mills, Brazil has high-grade iron ore deposits
and is currently the world’s leading producer and exporter of that raw
material. Also figuring into Brazil’s competitiveness are good, low-cost
logistics due to the advantageous mine-mill-port-market arrangement
geographically inherent in the country’s installed capacity. The in-
dustry is also at the forefront in terms of awareness of environmental
issues, and nearly all Brazilian steel mills have achieved ISO 14000
certification.

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Quality of Siderurgy products: steel bobbin supply
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of Cosipa, in Cubatão, São Paulo.
Continuing trends favoring increased internationalization and
concentration in steelmaking have led to processes involving similar
changes in Brazil. The result has been greater competition in the indus-
try, requiring permanent investment in competitive upgrades through
application of current technology, product and process development,
managerial methods and economies of scale.
No small consideration should be given to the fact that Brazil’s
steelmaking industry is comprised primarily of publicly-traded corpo-
rations which place great emphasis on corporate responsibility. Bra-
zilian companies are therefore increasingly preoccupied not only with
quality production and its attendant profits, but also with social and
environmental issues, and in standards reconcilable with consumer de-
mands and the larger requirements of society in general.
Related issues, such as the country’s economic growth and cur-
rent low per-capita consumption figures point to a likely increase in
demand for steel in coming years. Brazilian Steel Institute (IBS) market
projections call for annual growth rates of better than 8% over the next
five years.
Given those prospects, the companies comprising Brazil’s current
steelmaking capacity are calling for investments on the order of $11.2
billion from 2006 through 2010—primarily to increase their capacity
from 36 million to approximately 44 million tons per year.

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In addition to the previously mentioned investments, there are
projections calling for increased capacity, with the construction of new
greenfield plants intended to strengthen exports of merchant semis.
This, as we’ve seen, is the Brazilian steelmaking industry’s traditional
approach. These investments, planned by international companies in
partnership with Brazilian companies, hope to benefit from compara-
tive advantages Brazil has to offer.

Luiz André Rico Vicente


President of the Brazilian Steel Institute (IBS)
www.ibs.org.br

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