The Brazilian steel institute, Instituto Brasileiro de Siderurgia (IBS), has forecasted that the country's apparent steel consumption could fall to 18.7 million mt in 2009, from 24 million mt in 2008.
IBS technical director Rudolf Buehler stated, "In the most optimistic projection, with the Brazilian gross domestic product growing at five percent each year, we will reach 2008 levels only in 2011."
Brazil's economy expanded 5.1 percent last year, compared with 5.7 percent in 2007. In Q1 2009, Latin America's largest economy expanded 1.3 percent from the year-ago period.
Mr. Buehler said that he expects global consumption to fall 14 percent in 2009, compared to last year. He added, "During 2007 the decrease in sales in the local market was offset by an increase in exports. But in the current scenario, this possibility is not feasible due to the excess in supply at international prices well below production costs."
According to Brazil's Bureau of Foreign Trade data, in the first four months of 2009 Brazil's steel exports totaled 2.099 million mt, while in the same period of 2008 the country's steel exports came to 3.512 million mt. In January-April 2009, Brazil's crude steel production was 6.729 million mt, down 41.7 percent year on year.
In April 2009, the Brazilian government reduced the industrial products tax (IPI) on white line appliances by as much as 10 percentage points to boost the consumption. According to Mr. Buehler, the tax reductions are aiding sales, but are not a permanent solution. He added, "The IPI tax just helped clear inventories so far."
Mr. Buehler also emphasized that local steelmakers are not only struggling against the heavy economic conditions, but also have to compete with the dense inflow of less expensive Chinese imports.