Domestic mills have been eyeing the international market to steer their flats prices, rather than applying prices based on how much they believe the domestic market can endure, the director of major steel distributor Frefer Metal Plus
, Christiano Freire
, said during an exclusive interview.
According to Freire
, even with price hikes from mills of around 8-12% effective with March 1 orders, domestic flats prices are still about 12% less than those for imported material, making imports less attractive.
"Last year, steel distributors imported arbitrarily," Freire
"In 2011, imports will only fill the demand that local supply cannot possibly meet."
Domestic mills will only raise prices when demand dictates, avoiding creating demand for imports, Freire
The latest prices will depend on exchange rates, as well as international steel and iron ore prices.
Another price increase of 12% may come in June.
Meanwhile, "the increases to be passed on to end users are expected to be higher than those applied by mills, since we need to expand our margins," Freire
noted 2010 was unusual for the Brazilian steel market.
There was strong demand post-economic crisis and also a big difference between imported and domestic prices.
However, local mills did not believe distributors and end users would resort to imports.
"When a distributor began to import at lower prices, the others followed suit," Freire
Suddenly, imports increased from about 100,000 tonnes/month to nearly 400,000 t/month in mid-2010, totaling 4m t in 2010 - roughly the output of a new mill, he
Consequently, with excess supply, prices fluctuated and inventories overflowed to the record high of 4.1 months of sales in December.
Brazilian mills were forced to cut prices below market levels.
"This move hurt companies' profits, but eliminated, in the short term, the fierce competition from imports," Freire