Reuters reported that a tumble in Brazil's currency and rising taxes on imported cars could provide a lifeline to local steel producers, which are struggling to keep foreign competitors at bay.

As per report, the 17% drop in the Brazilian real this month is helping drive up the cost of imported slabs, rods and other products, while making Brazilian made steel cheaper abroad. The sudden boost means a relief for steelmakers as long as a global economic slowdown does not lead to lower prices.

The government has also done its part, slapping a tax hike on imported cars and requiring local automakers use two thirds domestic content in their vehicles. Some industry sources said the move acts like a barrier on indirect imports of steel a great part of imported car pieces are made using foreign steel products.

Steelmaking still faces a crisis globally as producers grapple with overcapacity, poor demand from some important buyers and economic weakness in the United States and Europe.

But in Brazil, where mills have been struggling to raise prices amid strong demand for cheaper steel produced by countries such as China and Turkey, the real's sudden weakness could buy producers some time and give beleaguered shareholders a break.

Mr Carlos Eduardo, an analyst with Banco do Brasil, said that "That push from the government for domestic production could help the whole steel industry."

Mr Eduardo added that long steel products used in construction are already seeing government support from initiatives boosting affordable housing and infrastructure.

Indeed, the currency theme has taken the front seat, helping ease concerns over the industry crisis and speculation that Usiminas could be the target of a takeover attempt by either CSN or Gerdau.

(Sourced from www.reuters.com)