Latin America-focused steelmaker Ternium expects its Brazilian subsidiary, Ternium Brazil, to produce 4.3 million mt of slab this year, two top executives said this week in a conference call with analysts.
Ternium Brazil, formerly known as Companhia Siderurgica do Atlantico (CSA), has a 5 million mt/year slab capacity. Ternium bought the plant from ThyssenKrupp in 2017 for EUR 1.5 billion, and then renamed the company Ternium Brazil. The company’s forecast comes as Ternium was hit with decreasing steel prices and higher raw material costs.
“In Brazil, we have to be flexible to what is happening in the market. In 2018, we produced roughly 4.6 million mt (at Ternium Brazil) and we were expecting to reach this year 4.7 million mt to 4.8 million mt (in terms of production),” said CEO Maximo Vedoya.
“That’s not going to happen,” he added. The executive said Ternium had to reduce its marginal cost production following weaker conditions. The weaker prospects were due to “the decrease in prices and the increase of raw material (prices), especially iron ore.”
“That means that this year we are going to reach the 4.3 million mt (production) and we are now producing at an annual level of 4.1 million mt,” Vedoya said, adding that the lower production volume allows the company to use fewer pellets.
“We try to adapt very quickly to the market conditions and leave the Brazilian facility to be very, very competitive against the world in producing slab, this is the way,” he said.
CFO Pablo Brizzio said Ternium is expecting decreased slab shipments to third parties out of its Ternium Brazil mill.
“We are working very hard to adjust the cost structure of the production level of our Brazilian unit to cope with the reduction in margins due to the lower prices of slab that are basically in line with the reduction on the prices of steel in the market, especially in the US,” Brizzio said.
Vedoya said Ternium Brazil is experiencing “some pressure” on margins. Additionally, slab sales have been “weak” as “low (economic) expectations for Brazil are taking longer than expected to materialize.”