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Brazil’s Steelmaker Gerdau Counting on World’s Growing Steel Hunger

Gerdau, steel company from Brazil According to information supplied by the president and CEO at Brazilian steel-maker company Gerdau, André Gerdau Johannpeter, Asia and Latin America together with the Middle East should boost their product's global consumption in 2008, which he expects should grow between 6% and 7%.

In the first half this year, global steel production grew 5.7% to reach 696 million tons, according to figures provided by the International Iron and Steel Institute (Iisi).

The Brazilian-based Gerdau is a worldwide leader in long specialty steels products for the automobile industry, and according to news stories published in the Brazilian media this week, the company is contemplating establishing a factory in the Middle East, in order to manufacture long steel for the construction industry.

In the first half this year, Gerdau invested US$ 4 billion in acquisitions and immobilized assets.

Brazil exports steel to the Middle East, a region where most of the Arab countries are located. From January to June this year, the country sold US$ 106 million in rebar to the Arab countries, and US$ 82.4 million in semi-manufactured products.

Upon releasing its half-year results last week, Gerdau did not provide detailed information regarding the destinations to which it exports. However, the company informed that it posted revenues of US$ 994.5 million in foreign sales. Exports from the company's units in Brazil totaled 1.4 million tons.

The volume of exports by Gerdau decreased 2.8%. The largest reduction was that of long steel production, as the company had to cater to a rise in domestic demand. According to Johannpeter, the reduced flow of exports helped the company reduce its costs and increase its margins, as expenditures on domestic product distribution are lower than those on foreign market distribution.

Gerdau promises to sustain its expansion throughout the year. The company owns units in Brazil, Argentina, Canada, Chile, Colombia, Spain, United States, Guatemala, India, Mexico, Peru, the Dominican Republic, Uruguay and Venezuela.

In the first half, the company took several important steps, such as the acquisition of a complementary share of Aços Villares, in Brazil, the purchase of Macsteeel, Century Steel, and Hearon Steel, in the United States, and the acquisition of a larger share at Diaco, in Colombia. Gerdau also made purchases in Chile, Mexico, Guatemala and Spain.

The consolidation of new companies and rising global demand levered Gerdau's performance in the first half. The company had a 35.2% increase in gross margin, which totaled 22.3 billion reais (US$ 14.1 billion), and a 38.3% rise in net margin, which reached 3.2 billion reais (US$ 2 billion).

The earnings before interest, taxes, depreciation and amortization (EBITDA) totaled 4.7 billion reais (US$ 2.9 billion) from January to June, with growth of 51.7% and a margin of 23.6%. Raw steel production rose to 10.8 million tons, representing growth of 25.6% over the same period of 2007.

During a press conference, Johannpeter and the executive vice president for finance, accounting and investor relations at Gerdau, Osvaldo Schirmer, stated that both the domestic market and the company are going through a good moment, as demand is on a high.

However, costs have risen, boosted by higher prices of ores, scrap iron and electric power. "The strong global demand allowed for a price alignment. By reducing our costs, we managed to increase our margins," said Schirmer.

Anba – www.anba.com.br

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  • Show Comments (3)

  • AUGUSTUS

    Important Correction of Roman name used above – HELVETIA instead of HIBERNIA
    Apologies for the oversight!
    HELVETIA = Roman name of current Switzerland 🙁
    HIBERNIA = Roman name of current Ireland 🙂

    Perhaps I should also check out my levels of bile – LOL 😮

  • AUGUSTUS

    BLA BLA BLA- Still amazed by the absence of capital letters, I wonder: which source of Steel does not share Gerdau’s view on China?
    I truly do not believe that one could realistically find many Steel producing enterprises À¢€“ as well as major suppliers of ANY other material required by heavy industries – which would seriously not share Gerdau’s views, hopes & fears regarding their (acknowledged) dependency on China’s needs & requirements for its vast industrial projects. These fears are indeed very likely shared not only by the previously mentioned companies across the world, but also by the very governments where any such supplier may resideÀ¢€¦

    During his many emotional outbursts across the À¢€œBRAZZILÀ¢€Â sites, always eager to humiliate, challenge or otherwise dispute ANY view or opinion involving Brazilian concerns, our “beloved” Swiss Blogger appears to get occasionally blinded by some obvious details, and therefore fails to acknowledge the fact that, in some cases, his criticisms may actually have nearly universal application, thereby dismissing the sole intended purpose of attacking and humiliating Brazil and/or Brazilians.

    Whenever stumbling upon the opportunity for yet another degrading strike presents itself for his ignoble purposes, our À¢€œunmentionableÀ¢€Â but valiant À¢€œKnight Templar of modern HiberniaÀ¢€Â appears to access some contraption, drawer, or international database to access À¢€œready-to-useÀ¢€Â lists containing extensive amounts of À¢€˜exceedingly boringÀ¢€Â statistical data, containing key details to make or enhance his spiteful intents of the moment. Conceivably there may be occasions, when his eagerness is À¢€œsuchÀ¢€Â that he may fail to obtain the necessary data in order to substantiate a certain claim, which in this particular case would undoubtedly represent a À¢€œdisproofÀ¢€Â of his latest allegation (above). Such evidence would have to include information which À¢€œI n d i s p u t a b l yÀ¢€Â proves that Gerdau is indeed the only (or one of the few) major Raw Material suppliers (across the Planet) which does not worry about (and hinge upon) decisions currently made in Beijing and/or the headquarters of key Chinese industrial concernsÀ¢€¦

    Perhaps too much À¢€œbileÀ¢€Â has risen from the stomach (of our adoring friend) this time around, and may have rendered his mouth way too bitter, thereby impacting upon his À¢€œbetter judgmentÀ¢€™?
    I wonderÀ¢€¦

  • ch.c.

    So right ! Maybe only !
    August 11, 2008
    Brazilian stocks declined, led by steelmakers, on concern prices will fall after China, the biggest producer of the metal, said exports surged to a record.

    Gerdau SA, Latin America’s largest steelmaker, dropped to the lowest level in four months after China said international sales rose 38 percent from June to an all-time high.
    “China was the only country that had the capacity to increase production and it looks like they did,” said Bernardo Lobao, a metals and mining analyst at BNY Mellon Arx, which manages the equivalent of $5.66 billion in Rio de Janeiro. “If China exports more, it will increase the amount of steel available in the world and affect the price.”

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