Usiminas Contemplates Strategic Furnace Closure

Marcelo Chara
Marcelo CharaImage Source: Usiminas

Synopsis:

In response to diminished domestic demand for flat steel products, Usiminas' CEO, Marcelo Chara, suggests the potential shutdown of blast furnace number 2 during the reinauguration of furnace number 3. Chara highlights the dependence on market conditions and emphasizes the necessity of a 25% increase in the import tax on Chinese steel to align production structures. With both blast furnaces one and two idled, Usiminas would solely rely on the 3.0 million metric tons capacity of blast furnace number 3.

Article:

In a ceremony marking the reinauguration of blast furnace number 3, Marcelo Chara, CEO of Usiminas, addressed concerns over the reduced domestic demand for flat steel products. He indicated that the company is considering the closure of blast furnace number 2 as a strategic response to market dynamics. Chara stressed the importance of aligning production structures with prevailing market conditions.

The potential closure of blast furnace number 2 is contingent upon a 25% increase in the import tax on Chinese steel. Chara conveyed that without this adjustment, Usiminas would need to adapt its production structure to navigate the challenges posed by the influx of Chinese steel at what the Brazilian steel industry alleges are dumping prices.

Blast furnace number 2, with an annual production capacity of 600,000 metric tons, mirrors the capacity of blast furnace number 1, which was shut down in December. If both blast furnaces one and two are idled, Usiminas would rely solely on the capacity of blast furnace number 3, which stands at 3.0 million metric tons per year.

The backdrop of this decision lies in the surge of steel imports from China to Brazil, with 2.37 million metric tons in 2023 compared to 1.41 million metric tons in 2022. The Brazilian steel industry contends that these imports are occurring at dumping prices, necessitating measures to safeguard domestic production.

Conclusion:

Usiminas' contemplation of blast furnace closure underscores the intricate balance companies must strike amidst shifting market dynamics. The decision hinges on policy adjustments, specifically a potential 25% increase in the import tax on Chinese steel. As the Brazilian steel industry grapples with allegations of dumping, Usiminas navigates strategic decisions to adapt its production structure, ensuring resilience in a challenging market landscape. The outcome will significantly shape the company's operational trajectory and its response to evolving global trade conditions.

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