BRASÍLIA: A strong US dollar compared with the Brazilian Real and a wish to recompose margins drove Brazilian long steel producers to price hikes already in effect for October shipments, sources said Friday.
Despite poor demand and reduced competition from imports, Brazilian producers have raised prices by up to 15% in some cases.
Based on a market-participant survey, the Platts monthly assessment for rebar rose 7% to a range of Real 2,260-2,470/mt ($565.36-$617.99/mt) ex-works, excluding taxes, for October shipments. Prices have been stable at Real 2,132-2,274/mt ex-works, excluding taxes, since July.
For wire rod, the assessment range rose about 3% to Real 1,750-2,050/mt ($438.50-514.02/mt) ex-works, excluding ICMS Pis/Cofins and IPI taxes.
But the new price hike from mills on wire rod and rebar products is making business even more difficult for steel distributors, who are not able to pass the full adjustment on to end-users.
“Companies are pushing prices up, but demand is decreasing month after month,” said a distributor located in the southeastern region. “I don’t think to be possible to transfer this increase to my selling offers.”
According to the distributor, longs producer Gerdau is raising products prices in two installments of around 8%, with the first effective October 1 and another expected in November. “All steelmakers raised prices, but I still have products at the old price to receive from ArcelorMittal and Sinobras,” he said.
Another producer reported a 12% boost in its rebar prices. “Mills are pushing prices higher [but] demand is negative and sales are falling,” he said. “There are not even infrastructure projects coming [onstream] to be used as a rationale.”
He added that the market is flooded with rebar, and expressed concerns on how difficult it would be to pass on the increase to his customers. Moreover, a construction company executive confirmed receiving a letter informing him of a 15% increase in rebar.
A buyer of drawn wire to produce nails and screws also heard an increase of 14%-15% for wire rod purchases. “But my suppliers of drawn wire have passed me on an increase of 8% from October on,” he said, adding it also would be “very complicated” to raise its final price.
“We will absorb the major share of this amount,” he said. Another nails and screws producer reported further deterioration of demand in September. “The company was … breakeven until August. In September, it worked below it,” he said, also citing a 14%-15% raise in its rod price.
