Brazil Steel Mills Begin Price War

Brazilian steel makers have cut domestic steel prices by as much as 20 percent due to record-breaking stockpiles and competition from cheap Chinese imports, according to local reports.

Brazil's steel inventory reached 1.26 million metric tons in July, equivalent to nearly four months’ worth of consumption, according to Brazil's Steel Distributors' Institute.

Earlier this year, Brazil increased imports of cheaper steel from China. Brazil's mills then raised prices for their own steel by about 15 percent due to sharply higher prices for iron ore and other raw materials, making imported steel as much as 25 percent cheaper than domestic steel.

Since then, Brazil mills cut prices on steel, closing the gap between imports and domestic products. What was once a US$300 gap per ton has been reduced to $100 per ton in the past several weeks. While domestic steel is still more expensive, the shorter wait time for delivery may offset the premium, according to a Steelcom trader, effectively reducing stockpiles over the next several months.

Brazil's steel stockpiles should shrink to normal levels within approximately 90 days. Prices are expected to bounce back by November, Christiano da Cunha Freire, president of Frefer Metal Plus Ltd., a steel distributor, told reporters.