Brazil: Flat Steel Mills Raising Prices, Despite Global Headwinds

What’s New — Brazil flat steel mills are moving ahead with planned price increases (~10% in June/July for most customer segments). This move is in contrast to global steel prices which have declined in recent weeks. The domestic HRC price will rise to ~US$1,150/t, a $200-250/t (+25%) premium over import equivalent .

Higher imports are likely unless the BRL weakens. Higher Prices Should Stick — These price increases carry some risk but should succeed, in our view. Domestic demand is strong enough to absorb extra imports
without the need for blast furnace cutbacks. And global steel prices are likely to rebound as higher raw materials costs put a severe squeeze on margins in 3Q/4Q10. Usiminas has the most leverage to higher domestic steel prices.