Steelmakers return to profit and can record another year of growth

With the gradual resumption of internal demand and advantages compared to international prices, Brazilian steelmakers returned to profit in 2018. For this year, the market expectation is that companies have again a positive operating performance, but cost effectiveness depends on factors such as foreign exchange and global supply. " What favored the increase of steel prices last year, in Brazil, was the rise of the prices in the international market in 2017 and 2018, as well as the depreciation of the real against the dollar. However, we expect some reversal of that movement in the short term, taking into account that international prices have shown significant drop in recent months, "says Trend analyst consulting, Felipe Balakrishnan. The analyst at Mirae, Pedro Galdi, believes there's room for adjustments in the domestic market since the price difference between the national and imported product stay in at least 15%. "Otherwise, not worth importing, because it is always a risk for the Manager." However, he adds that the signs of local steel mills to continue applying price increases might not revenge. "We need to wait to see whether the market will absorb these adjustments." On Thursday (21), two industry giants have shown robust growth in 2018. Gerdau reported net profit of $2.3 billion in the period R, reversing a loss of R $339 million in 2017. Already the Companhia Siderúrgica Nacional (CSN) obtained a net profit of Rs $5.2 billion last year compared to $111 million in 2017 R since the earnings before interest, taxes, depreciation and amortization (Ebitda) adjusted the Gerdau R $6.6 billion last year, up 54% about 2017. The CSN's Ebitda grew 26% on the same basis, for R $5.8 billion. Galdi highlights that despite the Gerdau have registered, in 2018, fall of the crude steel production (-4.8%) and also in sales (-2.5%), the company benefited from us operations. "In the case of the CSN, the expressive growth of the profit is mainly due to the financial gains of over and fall of Selic" analyses. Yet at the end of the week, Usiminas has reported a net profit of $829 million on R 2018, almost triple the previous year. In the framework of improvement of the results, executives of mining steel and CSN have declared the market that should apply new readjustments in 2019. However, Balakrishnan ponders global steel production is growing at a strong pace, while the scenario of slowing Chinese economy has become more clear. "In addition, after the elections in Brazil, there was some appreciation of the exchange rate on the Bank, which also hampers the implementation of further increases in steel prices on the domestic market," says. On the other hand, domestically, Galdi sees a continuous improvement of steel demand on the growth forecast of 3% of gross domestic product (GDP). "The Manager will continue postponing the decision of investment while the Government fails to approve pension reform. With this approval, the trend is an increased confidence and consequent high consumption, "he says. The expressive mining of iron ore last year come steelmakers also benefited. The net revenue of the mining arm of the CSN R $5.98 billion in 2018, an increase of about 30% about 2017. "The mining was one of the factors that contributed to the result," points out Galdi.No though, steelmakers must face challenges in the mining sector, after the breakup of the tailings dam of Vale in Brumadinho (MG), since public agencies have adopted more and more restrictions on the use of ancient structures. In this scenario still uncertain, Usiminas might face additional challenges to sell your mining arm (Muse). "After the disaster of Brumadinho, the whole market is more cautious," says CSN already informed Galdi yesterday to analysts that until 2021 intends to work only with dry dams. "This will be a very laborious task," says the analyst.