Brazil’s largest steel manufacturer ArcelorMittal Group, which belongs to Indian billionaire Lakshmi Mittal, put on the brakes on some of its investments in the country. The manufacturer decided to put on hold two projects worth more than US$1.5 billion. The reason, it claims, is the stagnation of demand with the slowing economy.
“We will wait for more clarity on the market’s direction before we restart these projects,” company president Benjamin Baptista told news site Valor Economico. The executive said that there is no way of maintain its investments amid the crisis in the euro zone, China’s slowdown and the global oversupply of steel.
He is somewhat bearish on the economy and the global steel industry. “Perhaps we have yet not reached rock bottom,” said Baptista.
The planned expansions in the country are linked with the automotive sector and industry. According to him, as the economic situation has been worsening, the talks about increasing supply does not make sense anymore.
“With the government’s measures of lowering interest rates, increasing credit supply and protecting the local industry from imports, I expect the economy to improve in the second half,” says the executive. In his view, the exchange rate is another uncertainty. Hence, he thinks it is still early to resume projects.
According to Baptista, the domestic demand for flat steel ended the first quarter down 1%, which has also hit its competitors Usiminas and CSN. In the segment of long steel, where the fight is between Gerdau and Votorantim, the 1Q demand was slightly better at +4%, driven mainly by infrastructure and housing construction.
Industry experts say that margins are being squeezed in the sector as demand slows and costs increase. Just last week Rio’s CSA had negative results and its German parent company Thyssenkrup put the plant for sale.