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Brazil's CSN may stop blast furnace at Volta Redonda on weak demand
Source: S&P Global Platts
Brazilian integrated steelmaker Companhia Siderurgica Nacional (CSN) said it may stop its blast-furnace No.2 at the Volta Redonda steel mill due to weak demand and sufficient inventories that can cover sales for the rest of the year.
"From the point of view of production, it makes perfect sense to stop," CSN's CEO Benjamin Steinbruch said Friday on a conference call with analysts. "It makes sense because it will allow us to sell more iron ore, use less pellets, and have less dependence on external coke."
One reason to keep the No. 2 blast furnace operating is for exports, the CEO said. "Then it would make sense to continue operating with all lines of equipment and expecting a recovery (in demand) later in the year, and to start 2021 in full," he said.
CSN expects its steel production costs to fall if the No. 2 blast furnace is stopped, since No. 3 blast furnace had a major renovation last year and operating costs were reduce as a result.
The No. 2 blast furnace is responsible for 30% of the company's 5.6 million mt/year of crude steel output, while the No. 3 furnace accounts for 70%.
Although steel demand is weak because of declining vehicle sales and slow demand for household appliances, CSN is planning to raise steel prices by 10% to 12% in June in Brazil, given the significant devaluation of Brazil's Real against the US dollar this year.
'No escape'
"There is no escape from that. We will correct (prices) in June and we will see who buys it," CSN's commercial director Luis Fernando Martinez said on the conference call. Steel imported in Brazil is currently trading at a discount of 12% to 15% to the Brazilian good after customs clearance.
S&P Global Platts assessed Brazilian domestic hot-rolled coil unchanged on the week at Real 2,570/mt ($440.07/mt) ex-works, excluding taxes, Friday, based on a range of Real 2,550-2,590/mt.
According to Platts calculations, Brazilian HRC is currently at a discount of 14.3% to the Chinese HRC delivered price at Brazilian ports, after customs clearance, of $513.63/mt.
The devaluation of the Real makes the company's steel more competitive abroad, and Martinez stated that CSN already has its full quota for the US this year with 300,000 mt purchased. Because of this, the company is looking for customers in Canada, Mexico and Latin America.