In a panel during the 33rd congress of the Brazilian steel institute IABr, this week in São Paulo, the CEOs of Gerdau and ArcelorMittal, among other executives of the sector, warned that if a requested 25 percent import tariff for steel products is not approved in the short term, more steel plants will stop production activities and the industry will have to start a round of layoffs with the workforce.
Gustavo Werneck, CEO of Gerdau, mentioned that the group already has two plants that have stopped operations, one in the state of Ceará, in the northeast, and other in the state of São Paulo, in the southeast, adding that so far, the company is paying the salaries of 600 employees that are not working, but this is not possible to maintain indefinitely.
Jefferson de Paula, CEO of ArcelorMittal in Brazil, said that more Brazilian steel plants will suspend activities until the end of the year, if the current 9.6 percent average tariff is maintained. He added that, in addition to the lay-off of the working force, the company will have to consider the postponement of investments in Brazil, an estimated $12.5 billion until 2027.
The steel industry in Brazil is currently operating at a 60 percent production pace, and most players blame steel product imports for the problem, which have reached 3.2 million mt between January and August, a 48.6 percent increase from the same period in 2022.
According to analysts, the government authorities are reluctant to accept the tax increase asked by the steel sector, as representatives of steel consuming sectors, chiefly the civil construction, have warned that steel prices in the domestic market will increase soon after a higher tax is imposed.
But the executive president of IABr, Marco Polo Lopes, said that such reasoning makes no sense, as it is not possible to increase prices when the demand is low, and the steel production sector has a 40 percent idled capacity.
The domestic price of steel products in Brazil is usually based on the price of a similar imported product after clearing customs.