A Gerdau (GGBR4) and CSN (CSNA3), two large steel companies, will be affected by the new rule to control the quantity of the product that Brazil imports, according to Safra analysts. Specifically, 16% of imports of long steel products from Gerdau and CSN would be subject to the tariff following a measure announced by the Ministry of Development, Industry, Commerce and Services (Mdic) this Tuesday (23. Under the new rule, 11 Imported steel will be subject to import quotas. If the maximum volume is exceeded, they will pay 25% Import Tax to enter the country.
If any company imports more than 30% of what it used to import in the years 2020 to 2022, it will have to pay a 25% tax on steel.
Other countries, such as the United States, Chile and Mexico, have also established similar measures to prevent China from selling too much cheap steel.
Safra’s analysis shows that flat steel producers are the main beneficiaries of these measures, as products subject to the quota represented 66% of flat steel imports in 2023, compared to just 26% of long steel imports.
However, according to strategists, some adjustments are necessary to accurately reflect the impact on companies in the sector. Excluding tubes, produced exclusively by Vallourec, only 16% of imports of long steel products in 2023 would be subject to quotas and tariffs.
In quantitative terms, Brazil imported approximately 1.1 million tons of steel products flat subject to the quota in the years 2020 to 2022, implying that around 510 thousand tons, or approximately 3.6% of apparent consumption of flat steel, would be taxed at the import tariff of 25% in 2023.
Already the long steel products (excluding pipes) subject to the quota, according to the bank, totaled 159 thousand tons in this period, theoretically leaving only 71 thousand tons, or around 0.8% of apparent consumption, subject to taxation in 2023.
Regarding future prospects, the analysis points to a slightly positive impact for flat steel and neutral for long steel. Analysts’ expectation is that the measures will strengthen domestic sales of Brazilian steel producersreducing imports and, consequently, bringing relief to margins due to the dilution of higher fixed costs.
Safra says that the Usiminas (USIM5) is identified as potentially benefiting more than CSN and Gerdau due to its greater exposure to flat steel in the Brazilian market. The report points out that it is important to note that all flat steel products subject to the quota appear to be part of Usiminas’ sales mix.
However, according to the bank, a significant increase in domestic prices is not expected in the coming months, due to looser supply and demand for long steel, which should not find much relief in the new quotas and tariffs. Additionally, import parity levels for the plan remain high, which limits the potential for price increases.
Camex establishes import quota for 11 steel products
In the next 30 days, 11 types of imported steel products will be subject to import quotas. If they exceed the established limit, a 25% rate of Import tax will be applied to allow you to enter the country. The decision was taken today by the Executive Management Committee (Gecex) of the Chamber of Foreign Trade (Camex).
According to the Ministry of Development, Industry, Commerce and Services (Mdic), the implementation of this measure is expected to take place in around 30 days. This is because Mercosur member countries will need to analyze the Camex resolution before its publication in the Official Gazette of the Union. Furthermore, it will be necessary to wait for the publication of an ordinance by the Federal Revenue Service to regulate quotas.
The measure, valid for 12 months after publication, aims to avoid unfair competition with steel produced in Brazil. According to information from the Ministry of Development, Industry, Commerce and Services (Mdic), in 2023, the volume of imports of 11 steel exceeded the average imports between 2020 and 2022 by 30%. In recent weeks, Brazilian steel companies have expressed concern about the invasion of Chinese steel products, which arrive in the country at lower prices than national products.
Currently, the Import Tax rate for the 11 products subject to quotas varies from 9% to 14.4%. The Mdic is also evaluating the possibility of imposing quotas on four other steel-derived products. These products were not included on the list at this time because the Mdic is investigating whether the increase in imports last year was due to fluctuations in prices rather than an increase in the quantity of products imported.
The Mdic states that technical studies indicate that the quotas will not have an impact on prices for consumers or the production chain. “Over the next 12 months, the government will monitor market behavior. The expectation is that this decision will help reduce the idle capacity of the national steel industry,” the ministry said in a statement.
Steel: find out which products are subject to import quotas and 25% tariffs
- Flat rolled products, of iron or non-alloy steel, with a width equal to or greater than 600 mm, coated with aluminum-zinc alloys;
- Flat rolled products, of iron or non-alloy steel, with a width equal to or greater than 600 mm, clad, plated or coated, galvanized by another process, with a thickness of less than 4.75 mm;
- Flat-rolled products, of iron or non-alloy steel, with a width of 600 mm or more, not clad, plated or coated, in rolls simply cold-rolled, with a thickness of more than 1 mm but less than 3 mm;
- Flat-rolled products of iron or non-alloy steel, with a width of 600 mm or more, not clad, plated or coated, in rolls simply cold-rolled, with a thickness of 0.5 mm or more but not more than 1 mm;
- Flat-rolled products of iron or non-alloy steel, with a width of 600 mm or more, hot-rolled, not clad, plated or coated, in rolls, simply hot-rolled, with a thickness of 4.75 mm or more, but not more than 10 mm;
- Other flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, not clad, plated or coated, in rolls, simply hot-rolled, of a thickness of 3 mm or more but less than 4, 75mm;
- Flat-rolled products of iron or non-alloy steel, with a width of 600 mm or more, not clad, plated or coated, in rolls, simply hot-rolled, with a thickness of less than 3 mm, and a minimum yield strength of 275 Mpa;
- Other flat-rolled products, of iron or non-alloy steel, with a width of 600 mm or more, not clad, plated or coated, in rolls, simply hot-rolled, with a thickness of less than 3 mm;
- Other wire rods of iron or non-alloy steel, circular in section, with a diameter of less than 14 mm;
- Pipes of the type used in oil or gas pipelines, welded longitudinally by immersed arc, of circular section, with an outer diameter greater than 406.4 mm, of iron or steel;
- Other pipes of the type used in oil or gas pipelines, welded longitudinally, of circular section, with an outer diameter greater than 406.4 mm, of iron or steel.
Check out four products that are being considered for possible import quotas
- Other uncoated, seamless steel alloy tubes used for well casing;
- Other pipes of the type used in oil or gas pipelines;
- Other pipes for casing wells, production or supply, of the type used in the extraction of oil or gas, made of iron or steel;
- Other pipes welded from other sections.
With Agência Brasil and Estadão Conteúdo
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