Despite this, the industry asked the government to consider raising taxes on imports, now set at 10–14%. But to the satisfaction of the motor and white goods industries, the request for extra anti- dumping measures was turned down. The official position was that, because imports have fallen from their highs of a few years ago, local steel companies do not need more protection and that some competition is positive.
There is still a long way to go before full recovery is achieved. For example, between 2009–2014, more than three million motor vehicles were sold in each year. Up to 28mt of steel was sold on the domestic market in those years, compared with last year’s 18mt. Virtually all the world’s leading motor manufacturers have plants in Brazil, where there is sufficient capacity to make five million units.
The large and powerful construction industry was also a major market for steel, particularly for long products, and was booming until three years ago. Demand for housing was stimulated by an overheated economy, low unemployment, and because access to credit had been eased. All these factors changed sharply during the crisis period, and only now has unemployment started to fall, and banks are easing credit restrictions once more. A very large number of unsold and uncompleted buildings still weigh on the market, however, so it will be some time before this important market for steel recovers.
In the past few years, the financial situation at all levels of government, central, state and municipal, has greatly deteriorated. Cash-strapped administra- tions at all levels have been forced to postpone, or halt infrastructure works which would require steel. Many of these are needed just to sustain exports at their current levels, let alone to allow the competitiveness of the goods Brazil exports, to improve.
One result of the better prospects for the economy is that investments of capital, notably from abroad, have risen greatly in recent months. Many long-delayed projects for new railways, ports and terminals, etc., are now moving ahead. Several involve investors from China, the leading market for numerous Brazilian commodities.These investors want to safeguard supplies and keep prices down.
Last year saw the start up of the 3mt- capacity Pecem steel mill, in the north easterly state of Ceara, built by the Korean companies Posco and Dongkuk, in conjunction with Vale. Like its fellow slab manufacturer, Arcelor Mittal, which operates three slab plants at Tubarao, Pecem will export the great majority of what it produces to associated companies round the world. The older Brazilian companies started up some mills which had been shut down, notably Usiminas’s Ipatinga, but not yet that company’s plant at Cubatao, near Santos.
The Gerdau company — which in the last years of the last century and early part of this, acquired numerous companies in the United States, elsewhere in Latin America and in Europe — has disposed of many, to reduce its debts. Other steel companies plan to sell iron ore mines, or their participation in ports and railways for the same reason. Gerdau itself has held on to companies which supply steel to the buoyant oil and energy industries in the United States, however, which are benefiting from fracking.
Brazil’s own oil industry, on the other hand, has been a great disappointment to the steel industry in the past few years. Following the discovery of large quantities of crude oil under deep waters offshore more than a decade ago, the oil industry announced that it would need dozens of complex production platforms, as well as many drilling rigs, in addition to numerous vessels of all types and sizes. A large network of pipelines would also be needed to bring oil and gas ashore, and because many wells are now drilled long distances under the sea bed. The strongly nationalist government that was in power when the oil was discovered decided that some of the revenues from the booming oil industry should be used to boost the economy as a whole. It was determined that up to 70% of all the equipment needed should be made in Brazil. Several shipyards built in the 1960s and 70s to provide vessels needed by Vale and oil company Petrobras, were given a new lease of life, while numerous brand new yards were built.
However, as well as Petrobras being forced to sharply cut back investment, many shipyards were caught up in the far reaching ‘car wash’ financial scandal, which involved widespread corruption which virtually bankrupt the oil company. This forced a sharp cut back in the ‘national content’ percentage of goods for the industry and urgently- needed production plat- forms were imported from China and Korea. Many shipyards have shut down and the hoped-for boom in demand for locally made steel for the oil industry has not materialized. Although hundreds of large wind-powered plants have been built, expansion plans for wind have now slowed sharply, cutting demand for steel.