Exclusive interview: IABr president sees positive signs ahead for the local steel sector

Wednesday, 26 October 2016 23:46:34 (GMT+3)   |   Sao Paulo

The worst may have gone and there are some positive signs ahead for Brazil’s steel and tube sectors, according to Alexandre Lyra, president of France-based Vallourec’s Brazilian operations and president of the local steel association directing council, IABr.
In an exclusive interview with SteelOrbis at the Alacero conference, held in Rio, Brazil, from October 25-26, Lyra said positive signs of recovery in the Brazilian economy may point to some improvement in domestic demand for tubes.
“As for the tubes sector in Brazil, we have a positive perspective because of the recovery of the financial health of state-run oil producer Petrobras [a major consumer of tubes in Brazil,” the executive explained.
“Petrobras is performing a number of partnerships, so for the short term, the major driver for a growth in tubes demand is Petrobras,” he added.
About 40 percent of Vallourec’s total output in Brazil is destined to the export market.
The Jeceaba mill, located in the city of same name in the state of Minas Gerais, has always eyed the export market since its launch in 2011, and the production mix shouldn’t change in the next few years.
“We have two sites: one that is more modern, whose mill was launched in 2011, and other in the area of Belo Horizonte, in Minas Gerais. Since the launch [of the Jeceaba mill] in 2011, our strategy was that it supplied the export market. As for the Belo Horizonte site, our focus is to meet the demands of the domestic market as well as Petrobras’ demands. This is our strategy, and it won’t change,” Lyra said.
As for the exports side, Vallourec has at least two major concerns in mind as part of the IABr association.
One is to keep existing duties on Chinese or any other foreign tubes and pipes, and second, fight along with other steel mills in Brazil to get back taxes paid through export incentive programs.
“We at IABr are insisting that the local steel sector needs to have competitive isonomy. Our export taxes aren’t retrievable. So our fight is to have the Reintegra [a pay-back tax export program] back. Currently, the Reintegra is at 0.1 percent, almost zero, and we want it to return to 5 percent,” Lyra said.
Seen in the past few years as an alternative for the crisis the local steel sector was in, as the currency rate was benefiting Brazil with a strong USD over the BRL, the stronger BRL isn’t benefiting exporters such as Vallourec in Brazil now.
“We need the Reintegra program back, since the currency rate is playing with us. Currency rate is less competitive for competition and we also have the capital cost issue, which is too expensive in Brazil. We need working capital for the raw materials and exporting services,” said Lyra.
The USD used to reach high currency rates as compared to the BRL, reaching as high as BRL 4.16. Today, the USD is about BRL 3.11.
On the trade defense side, the Vallourec executive said the company will continue fighting to keep existing duties on tubes.
Currently, Brazil has a number of duties on pipes and tubes, including definite AD duties for a period of five years over Chinese exports to Brazil of seamless steel tubes, seamless carbon steel tubes from China and Romania, non-alloyed carbon steel tubes, among others.
“We have lots of on-going AD requests and we’re in the process of renovating some of them. We’re extremely active in the trade defense side in Brazil. We’re concerned and focused in the renovation of the existing duties,” he said.

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