Wire rod and rebar are being offered by Brazilian producers to local traders to export, but prices remain a hurdle for closing deals.
A trader in Rio de Janeiro told SteelOrbis that mesh-grade wire rod was offered to him at $690/mt ex-mill, but he could not close the deal as the price would need to be at least $100/mt lower to achieve profitability in an export operation.
A similar situation occurred with rebar, offered at $730/mt ex-mill, which would require a $120/mt discount to achieve profitability in an export deal.
The source mentioned that Brazil could export more than 2 million metric tons of rebar per year to African countries on the Atlantic Coast, chiefly those located between Angola and Senegal, but tonnages remain irrelevant, having reached a mere 43,000 mt in 2013.
Brazilian steel producers are trying to compensate the reduced domestic sales by increasing exports, but poor and expensive internal logistics, associated to an overvalued BRL and to high energy costs remain an obstacle for the plan.
Steel producers that have previously bought energy in the free market to feed their EAFs have reduced their steel production and are selling the saved energy to the national grid.
Local press has mentioned energy traded at BRL 800/MWh ($353/MWh), comparable to acquisitions at less than BRL 100/MWh.
Usually relying on hydroelectric power for more than 95 percent of its electricity needs, Brazil is making intensive use of higher production cost thermal plants to produce energy, as result of a severe drought that has affected the level of the dams in the southern, southeastern and central western regions.