Steel producers to enforce scrap price cut - BrazilPublished by MAC on 2010-07-04
Source: Business News Americas (2010-06-30)
A Brazilian plan has been mooted to cut the price of domestic iron and steel scrap metals, or substitute them for cheaper imports.
This will inevitably threatening the livelihoods of many people, potentially boosting the expansion of damaging mines.
Those behind the scheme are the country's steel producers, led by Arcelor Mittal - the world's number one in the sector. Opposing the proposal is Brazil's iron and steel scrap association, Inesfa, whose president claims that:
"It will be a waste of natural resources and a step back for sustainability issues".
In 2008 and 2009, Brazil produced around 8 million tonnes of the scrap metal.
It's no surprise the likes of Arcelor Mittal want to secure these materials as cheaply as possible.
But many who collect and deal in scrap metal are urban dwellers, literally scraping a living from waste dumps and car graveyards.
If the iron ore price had remained at the lows of last year, there might be some justification for the move. However, demand is now more buoyant, with some projections that it will increase further.
And, as Inefsa's president, Marcos Sampaio de Fonseca, points out: when the market price goes bullish, that should be reflected across the production chain.
Simple economic theory tells us that, if the price of secondary supply is fixed too high - greater than future contracts for the primary metal - demand will go down and scrap workers will therefore suffer. So, as always, it's a question of how to balance risks.
What this article doesn't mention is the extent to which steel mills depend on a close relationship with the mining companies and the price at which their contracts are fixed.
Last year, China said it would cut back on domestic imports of iron ore and other metals in order to boost output from scrap.
Not long afterwards, four senior staff of Rio Tinto (the world's second biggest exporter of iron) were found guilty of accepted price-fixing bribes from some of the country's smaller steel mills. See: http://www.minesandcommunities.org/article.php?a=10056
In October 2009, Arcelor Mittal announced a supply deal with Vale - the world's number one iron ore miner - adding that it had selected Brazil and India as "new targets for investment".
It's true that melting-down scrap metals has its own ecological price, in terms of further sulphur dioxide and carbon dioxide emissions and discharges of chemical wastes.
Nonetheless, the "twilight" zone of scrap collection is an activity on which millions of people depend.
Their crucial role as agents of a more sustainable metals industry should not be wilfully jeopardised.
[Comment by Nostromo Research, 2 July 2010]
Steel producers to enforce scrap price cut - Brazil
By Fernanda De Biagio
Business News Americas
29 June 2010
Brazilian long steel producers' plan to enforce a 15% price decrease for iron and steel scrap from July will negatively impact the scrap productive chain, national association of non-ferrous, iron and steel scrap companies Inesfa's president Marcos Sampaio da Fonseca told BNamericas.
The main producers of long steel and the biggest consumers of scrap in Brazil are Porto Alegre-based Gerdau, ArcelorMittal Brasil, a subsidiary of Luxembourg-based ArcelorMittal, and Votorantim Siderurgia. In an effort to keep costs down, these players are also threatening to increase scrap imports if the sector does not accept the new prices.
Scrap prices should follow trends in the steel and iron ore industries, which are forecast to increase. However, the firms' plan to push down scrap prices is a move in the opposite direction, Fonseca said.
The decision to force prices down also weakens the recycling chain. "It will be a waste of natural resources and a step back for sustainability issues," he added.
At end-2009, scrap producers exported part of their production as domestic scrap prices were considerably pushed down, even though the Brazilian economy was recovering from the global crisis. "It does not make sense for scrap producers to start exporting while steelmakers import. The balance of supply and demand in Brazil is adequate to make both sides competitive," Fonseca said, adding that the scrap sector can fully supply steelmakers' demands.
The demand for scrap in Brazil has consistently grown and the outlook for the sector is positive in 2010 due to the federal government's growth acceleration plan PAC, as well as the upcoming 2014 World Cup and 2016 Olympics.
Usiminas to invest US$2.28bn in mining for output of 29Mt/y - Brazil
By Fernanda De Biagio
Business News Americas
30 June 2010
Brazilian steelmaker Usiminas is planning to invest 4.1bn reais (US$2.28bn) in mining operations through 2015 to reach iron ore output of 29Mt/y, CEO Wilson Brumer said during a conference call on Wednesday.
The company expects iron ore output to total 7Mt in 2010 compared to 5.5Mt last year. The production figures are set to rise to 8Mt in 2011, 25Mt in 2014 and 29Mt in 2015, Brumer said.
On June 29, the steelmaker's board approved the spin-off of its mining and logistics operations into a new company called Mineraçao Usiminas. The new firm will be 30% owned by Japan's Sumitomo, which has agreed to pay US$1.93bn for the stake.
Sumitomo will have the right to export 30% of iron ore surplus at market prices, Brumer said. Usiminas iron ore needs are currently at 12M-14Mt/y, according to the executive, but this is expected to increase in the coming years due to expansion plans.
Usiminas' iron ore operations supply its Cubatao mill in Sao Paulo state with all of its needs. Meanwhile, the Ipatinga plant, in Minas Gerais, is being supplied by compatriot miner Vale due to proximity and simple logistics.
The steelmaker is also evaluating building a pellet plant. "In order to be competitive, a pellet plant needs at least 7Mt/y of capacity as it requires a significant investment in infrastructure," Brumer said, adding that a plant of that size would cost US$800mn-900mn. "If the company decides to build a pellet plant, it will be part of Mineraçao Usiminas," he said.