Alacero, Latin America’s steel association, labeled plans by China’s CBSteel to build a mill in the city of Bacabeira, in the Brazilian state of Maranhao as “inappropriate.”
Talking to reporters at the sidelines of the Alacero conference, held in Rio, Brazil, from October 25-26, Alacero’s re-elected president, Jefferson de Paula, listed several reasons why the project isn’t welcomed by the regional steel association.
“We see it very badly. Our country is free, and many of our companies have operations in other countries. But we see [CBSteel’s] move as inappropriate,” he said.
“The surplus of steel in Brazil following the crisis is big. Today, we’re operating at 60 percent of our capacity, because the market is sluggish. Companies aren’t generating good results. So we don’t see anything strategic in it,” he criticized.
According to the Alacero executive, it would be better if a competitor operating within the same rules ran the project investment. “It’s not a private company investment, but a state-run investment,” de Paula said.
“I don’t know what [CBSteel] wants. Chinese companies doesn’t need to make money. Their focus is to generate jobs and keeping themselves operating,” he noted.
“A few years ago, we [ArcelorMittal] had longs competitors, such as Companhia Siderurgica Nacional (CSN). But these companies that are playing within the same game rules,” he added.
For Alacero, another worrying point of the prospective investment is the fiscal exemptions the Maranhao state could grant the project. CBSteel is expected to invest $3.5 billion in the first phase of the project, and then an additional $4.5 billion, as the mill reaches a 10 million mt/year capacity in longs.
The state of Maranhao expects to make the mill area an Export Processing Zone (EPZ), just like Vale’s co-owned slab producer Companhia Siderurgica do Pecem, located in the state of Ceara.
The mill is expected to be built in 2018 and start operations by 2022, initially producing 3 million mt of wire rod. Rebar production will commence later. Other benefits offered to CBSteel by the Maranhao state to establish its mill in Bacabeira include a 20,000-square-meter site to build the plant, plus a 95 percent discount over the ICMS tax.
“We’re going to compete with a state-run company, which doesn’t need to make money. On the other hand, this same company will receive fiscal benefits here. It is still an unfair competition. We can’t compete with a state-run company that has fiscal exemptions that we don’t have,” he said.