Steel should rise more in the coming years, says Gerdau

Gerdau hopes to maintain its profit margins at the high levels registered this year, supported by a scenario of rising international steel prices and strong demand in its main markets, said executives at the steel group on Tuesday (30).

The view, however, currently contrasts with uncertainties brought by the omicron variant of the coronavirus to the global economy and a slowdown in the construction market, where retail sales have more recently started to show signs of slowing.

“We are seeing a structural change in the international market on the issue of (steel) prices,” said the vice president at Gerdau, Marcos Faraco, in a presentation to analysts and investors.

“We believe that we are going to envision a higher price level for the next few years than we have seen so far. This is how we are looking at 2022,” said the executive.

Asked about the company’s business in the United States, an important generator of results for the group, after the agreement between the US and the European Union that eliminates steel import tariffs, the CEO of Gerdau, Gustavo Werneck, stated that the company expects margins in 2022 similar to this year.

“We expect stability in margins, in relation to what has been practiced in recent quarters,” said Werneck. In the third quarter, Gerdau’s adjusted Ebitda margin (earnings before interest, taxes, depreciation and amortization) was 32.9% against 17.5% in the same period in 2020. In the year to the end of September, the indicator is of 30.4%.

According to Werneck, the “metallic spreads”, the difference between the prices of the finished steel product and scrap used as raw material, should remain at historically high levels in North America, next year.

“We have reached historical levels of spreads in recent months, but we do not believe that these peaks will last throughout 2022,” said Werneck. “But certainly, over the next few quarters, with everything that has happened in the American economy, these spreads will navigate at historically high levels and we remain very optimistic with our operation,” added the executive. He referred to the infrastructure package approved earlier this month by the government of Joe Biden, worth more than $1 trillion (BRL 5.6 trillion at the current price).

In Brazil, Gerdau’s expectation for 2022 is to increase sales in the domestic market between 4% and 6% on the strong base of 2021, when the demand for steel in the country grew by about 25% over 2020, said Faraco.

“We are looking to 2022 with maintenance at the levels of demand, a very high level,” stated the executive. He added that the company is also working with a scenario of falling steel import volumes across the country for next year.

The special steels division should continue to feel the effects of the crisis in the supply of semiconductors for the automotive sector, its main customer. This year, automakers reduced sales and production growth prospects due to the lack of electronic components, something that should not be completely resolved in 2022.

“In Brazil, this difficulty is being mitigated by the growth of the heavy vehicle segment, which represents more than 50% of our special steel deliveries in the country,” said Werneck.

“We see a year of 2022 for our results for special steels in a way similar to 2021 (in Brazil)”, stated the executive. He added that in the US, after the company completed investments in its main plant in the segment in the country, in Monroe, the division’s results should show improvement over this year.