Exports Providing Support For Brazil Steel Mills - Report

A resumption of steel exports has been sustaining Brazilian steel mill operations since July, the Valor newspaper reported Wednesday.

According to the report, all Brazilian major steelmakers are benefitting from export demand.

Usiminas (USIM5.BR) vice-president for business, Sergio Leite de Andrade, told Valor that exports accounted for 35% of company output.

Usiminas has restarted two of its three furnaces which were off-line at the beginning of the month, and plans to ramp up output to 90% of total company capacity.

A fifth Usiminas blast furnace will restart only in the first half of 2010 when there are signals of firmer demand.

Andrade said Usiminas was exporting steel plate to supply rolling mills, as well as finished products such as fine steel sheets.

Usiminas is already shipping to the United States, Europe and Latin America, which were greatly affected by the world economic crisis, but China is the largest steel buyer in the world, the report said.

There was steel demand from China despite local production of 50.7 million tons in July.

Usiminas' Cubatao mill is operating at 380,000 tons a month crude steel capacity and should stay at that level until the end of the year, said Usiminas' industry vice president, Omar Silva Jr.

Cubatao's focus is the export market.

Usiminas' Ipatinga mill, with more sophisticated product lines destined for autos, home appliances and construction, is concentrating on the domestic market.

Ipatinga is operating at 75% capacity, despite having a blast furnace off-line. It plans to raise capacity usage to 85% by year's end.

"The recovery in demand in Brazil is still very slow in some sectors such as capital goods, construction and large-diameter pipes," said Silva Jr.

Companhia Siderurgica Nacional (SID), or CSN, is exporting 15% of its output, double what it exported in the first half of 2009, and a little above what it shipped in 2008.

Brazilian domestic demand last year was so heated that local steelmakers imported the product to meet local needs.

ArcelorMittal (MT), which makes steel plate and rolled coil, is exporting more than half the output from its operating blast furnaces. The company's two functioning furnaces are producing more than their installed capacity of 6.2 million metric tons.

ArcelorMittal's third furnace is scheduled to be on line next April.

ArcelorMittal's president for the company's Tubarao mill, Benjamin Baptista, said the main destination for sales was Asia, mainly China.

The mill was also supplying orders from its sister plant steel plate producer Imexa in Mexico, which has been on strike for two weeks.

The future, however, is not worry-free.

Brazilian steel companies said there were fears of excess supply over the next few months and preoccupation that domestic demand may falter if the government cuts economic stimulus measures.

-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086; [e-mail]