SAO PAULO – Brazil's Gerdau, the world's second largest producer of long steel, will keep domestic prices unchanged this year to avoid scuttling a nascent recovery in orders, Chief Executive Officer Andre Gerdau Johannpeter said on Nov. 26.

Porto Alegre, Brazil-based Gerdau, the largest steelmaker in the Americas, and rivals are struggling to contain a flurry of imported steel from China that is denting their domestic market share.

Yet, Gerdau Johannpeter said demand is recovering faster in Brazil than in any other of Gerdau's markets.

"There is no prospect for a readjustment in prices or a dismantling of discounts through year-end," he told journalists at an investor relations event.

The government in June reinstated an import tax on some steel products, bowing to pressure from local producers that were hammered by cheap Chinese steel and a strengthening local currency. The intensification of the global economic crisis since September 2008 pushed down demand across the world, depressed prices and sparked a steel glut on the home market.

But Gerdau has coped with all these problems by downsizing some of its units and slashing the cost of idle factories, Gerdau Johannpeter said.

He added that while the recovery in the United States, where it owns several units, will start to take shape during the second quarter of 2010, the situation of demand in Spain remains challenging.

Nonetheless, a weakening U.S. dollar is helping propel exports from North America. In Brazil demand is in pace, and the company is reducing exports to meet growing local orders, he added.

The company is considering coal acquisition opportunities in Colombia, Gerdau Johannpeter added, but noted the country's weak infrastructure poses "serious logistics hurdles."

One move that could also help the company lower costs would be importing coal into Brazil from Colombia, he said. The company is currently considering that as an option, he added.

Source: Reuters, November 26, 2009