-ArcelorMittal: Brazil per-capita steel consumption to rise on
infrastructure plan
-ArcelorMittal Brasil CEO sees weaker Brazilian real
"inevitable" in coming years
-ArcelorMittal awaits global confidence, local growth to restart
Brazil expansion
By Paul Kiernan
RIO DE JANEIRO--Low steel demand, one of a slew of challenges
facing the Brazilian steel industry, should begin to reverse in the
next few years as government efforts to upgrade the country's
infrastructure gather momentum, top global steelmaker ArcelorMittal
says.
"We should see per-capita consumption on the order of 250
kilograms," ArcelorMittal Brasil CEO Benjamin Baptista said in an
interview, noting Brazil's gross domestic product per head of
around $11,000. "It's very clear, if you go through Brazilian
airports, Brazilian roads, Brazilian ports, you'll see why. We have
an enormous deficiency in infrastructure."
Brazil's current per-capita steel consumption of 128 kilograms
per inhabitant is less than one-third that of China and less than
half of Turkey's, according to the World Steel Association figures
and local industry estimates. Stagnant consumption is among the
causes for low capacity utilization rates that, along with an
overvalued currency and high production costs, have sapped
Brazilian steel companies' profits in recent quarters.
Infrastructure projects are a primary driver of steel
consumption. Mr. Baptista said the situation is improving thanks to
government efforts to stimulate investment. "But it's a slow
thing," he added.
The administration of Brazilian President Dilma Rousseff has
undertaken massive infrastructure investments under its Accelerated
Growth Program, or PAC. The program calls for investments equal to
some $475 billion during the period of 2011 through 2014, but
specific projects have suffered problems ranging from cost overruns
to licensing and other delays.
Another issue ArcelorMittal sees working itself out in the next
two to three years is the position of Brazil's currency, which has
led to sharp growth in steel imports over the past decade. The
Brazilian real has appreciated some 40% over the past decade, even
as the country faced inflation of 5% or 6% most years.
"Economists say the adjustment of the currency is inevitable in
Brazil, and it should occur in coming years," Mr. Baptista said.
"The economy of Brazil won't sustain this currency appreciation for
much more time."
Like rivals such as Gerdau SA, Usinas Siderurgicas de Minas
Gerais SA and Cia. Siderurgica Nacional, ArcelorMittal has seen its
profitability in Brazil erode during recent quarters by rising
costs, tough competition from imports and a difficult environment
for raising prices. Steelmakers, including ArcelorMittal Brasil,
have succeeded in raising prices in the domestic market so far this
year, though analysts say the durability of the hikes isn't a
given.
With the Brazilian steel market already facing an excess of
production capacity and the European debt crisis gathering steam,
ArcelorMittal Brasil decided at the end of 2010 to halt its two
main expansion fronts--a galvanization project in Santa Catarina
state and an upgrade to the Monlevade long-steel facility in Minas
Gerais.
"As soon as we have more confidence in the recovery of the
global economy and more confidence in the effects of that on
Brazilian growth, those projects will definitely be brought back,"
Mr. Baptista said.
Write to Paul Kiernan at paul.kiernan@dowjone.com