Steel importers in Brazil are likely to face a tougher market in 2025 as government measures and the Brazilian real's depreciation to the US dollar make products from abroad less attractive.
Brazilian steel importers are concerned that tariff-quota and antidumping policy changes made this year by the federal and state governments could raise costs for importing cargoes in 2025, likely exacerbating the impacts of a sharply depreciated Brazilian real relative to the dollar. The concerns come as US president-elect Donald Trump is already raising global trade tensions, with specific focus on Mexico, Canada and China, that could unleash waves of dueling trade measures.
After seeing strong import growth in the post-Covid-19 recovery, Brazil steel importers are fretting they may lose momentum. Brazil's steel imports year-to-date November rose by nearly 24.4pc to 5.6mn metric tonnes (t) from the same period a year earlier. They are expected to end the full year 2024 up by 24pc, according to steel association Aco Brasil, after climbing by 50pc in 2023.
Apparent consumption rose by 9.6pc to 24mn t in the 11 months through November, while production increased by just 5.6pc to 31.17mn t from a year earlier.
Even with a 28pc depreciationof the real to the dollar in the 12 months through 24 December, prices for dollar-denominated steel imports still have a cost advantage over domestically produced steel.
But that advantage is narrowing as the real weakens, with the price difference from imports over the domestic market narrowing to just $112/t in the latest assessment for hot-rolled coils (HRC) from $172/t in mid-October.
"The dollar's [appreciation to the real] is messing up imports," one market participant told Argus, saying a wider price advantage for importers was necessary to offset issues like the exchange rate risk and the shipping time.
Market participants also cited rising borrowing costs in Brazil as an additional challenge for imports, as many buyers rely on financing to purchase material from abroad.
Brazil's central bank on 11 December unexpectedly hiked its target interest rate by a full percentage point to 12.25pc, citing the country's uncertain fiscal situation, accelerating inflation and challenging external conditions.
Importers recently expressed concerns over Santa Catarina state's decision to no longer grant tax incentives for imports of six different steel and iron products for commercialization or resale in 2025. Although the timeline for implementing the measure was postponed to July and could face changes, importers remain concerned and are monitoring any possible reviews of the decision, sources told Argus.
Santa Catarina's main port, Sao Francisco do Sul, accounted for over one-third of every steel product that is imported to Brazil from January to September, according to data from the country's distributors association, INDA, published in September.
On the federal front, the government is likely to announce new and renewed antidumping measures for products coming mainly from China, Brazil's largest steel supplier.
Another obstacle for importers would be a possible review of the tariff system for steel imports, which was implemented in June 2024 and led to additional tariffs of up to 25pc. The measure proved mostly ineffective at curbing imports into Brazil, and the industry group Aco Brasil said it would ask for adjustments.
Despite the challenges, there is still room for importers to bring material to Brazil, as the country lacks steel to supply its domestic demand, another market participant said.
"Brazil will always need imports because it still lacks some key home-made products to feed its market," the participant said.
