Brazilian steel production capacity at 47.5 percent, future investments uncertain

The Brazilian Steel Institute (IBS) released a report this week stating Brazilian steel production during the first two months of 2009 only utilized 47.5 percent of the country's total steelmaking capacity, a figure which clearly illustrates the steep damage caused by the global economic downturn as production capacity in the first two months of 2008 and 2007 reached 80 percent.
 
The report further details that the drop in production is mainly due to the weakening of the foreign demand, which has caused exports to drop 51.6 percent in January and February 2009 compared to the same period of last year. 
 
IBS’s VP, Marco Polo de Mello, explained that in the past the steel industry was able to weather domestic economic downturns by selling in foreign markets and vice versa. However, this time domestic sales have also been severely affected as they dropped 47.8 percent in the first two months of 2009.
 
On the bright side, IBS’s report explains that President Lula da Silva’s governmental adjustment to safeguard industrial production by exempting all factories from paying certain taxes should have some positive effects for the manufacturing industry, particularly for companies selling to automobile manufacturing facilities.
 
However, of the US$45.7 billion in Brazilian steel industry investments planned through 2013, one third may be suspended or even canceled due to the worldwide economic recession, further explained IBS’s report.