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Brazil's pig iron producers operating at 30-40% of capacity - 2 December 2011

Brazilian pig iron producers in the southeast state of Minas Gerais, which together account for 60% of national merchant production, are feeling the effects of the global economic downturn and are now operating at 30-40% of capacity, Steel Business Briefing learns from domestic producers.

Sources explain that since the 2008 global economic crisis, pig iron producers have struggled to recover export volumes. Their production registered at 60% during the first half of 2011 prior to dropping to the current level. Given the dependence on foreign markets, particularly the US and Europe - markets that have shrunk - demand has weakened further and forced shutdowns.

According to Minas Gerais pig iron producer group Sindifer, continuing low orders have reduced monthly production to 190,000 tonnes from an average of 250,000 t. Before 2008, this rate was 450,000 t/month. "Out of the 37 furnaces installed in the region, only 12 are operating," the group says.

Within the domestic market, "increasing imports of auto parts has also contributed to decreasing orders from melting shops and foundries," says Bruno Melo Lima, a Sindifer board representative.

Pig iron buyers have been reducing purchases for the past three months and market participants do not see a recovery anytime soon. However, the sector expects an export rebound next month.

The combined expected revenue for Minas Gerais pig iron producers this year is about R$4bn (US$2.2bn), in line with 2010, but well below the R$6.5bn of 2007.

Minas Gerais has about 66 ironmakers able to produce around 8m t/year.

 

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