The increase in US tariffs on steel and aluminum imports may force Brazilian steel companies to sell their products even cheaper in the American market. On Wednesday (4), Donald Trump's decree came into effect, setting the tariffs at 50%, double the 25% rate set in March. In May, ArcelorMittal Brazil CEO Jorge Oliveira told a report that the 25% tariffs had forced the company to sell its steel plates (semi-finished product) 5% to 7% cheaper to meet the American market and compete with Southeast Asian steelmakers, who can have more competitive prices than Brazilian ones. Before Trump's tariffs, Brazil received a different treatment in the American market. Until then, Brazilian steel companies could export 3.5 million tons of semi-finished steel to the US without paying tariffs - restoring minimum quotas is one of the Brazilian government's attempts to circumvent the losses caused by American tariffs. Now, any quantity of steel entering the country is taxed at 25%. This puts Brazilian companies on an equal footing with those from other countries. The semi-finished product represents 87% of all steel consumed by Americans. The largest exporters of this material are ArcelorMittal, which sends plates to its Alabama plant, and Ternium. However, Ternium exports plates to its Mexican plant, which processes the product and sends the final product to the US - so its exports are not counted by the American government as Brazilian origin. Data from Fast Markets shows that the price of exported steel plates from Brazil fell by almost 20% in early March, when the 25% tariffs took effect. Since then, price drops have been recorded, although less intensely. The drop, however, did not make the value paid by Americans decrease in relation to before the tariffs, as they need to pay high taxes on the product. The quantity of Brazilian semi-finished steel that arrived in the US also did not have significant variations. In February, for example, Americans imported 381,000 tons of plates from Brazil. In April and May, they imported 304,000 and 268,000 tons, respectively - the two months include import licenses and not what actually arrived in the US. The explanation for the less intense variation lies in the profile of steel production by US steelmakers. Americans mainly produce finished products that feed into manufacturing and construction industries and, to do so, rely on imported steel plates from other countries, mainly Brazil, the largest supplier of this type of product to the American market. The ArcelorMittal plant in Alabama, incidentally, is one of the largest steel importers in the US. This explains the negotiating power that Brazilian steel companies have with their clients, even if they are part of the same group. 'If the tariff makes it impossible to sell to the US, the problem for the US gets worse, because they don't have steel plates', says Carlos Jorge Loureiro, president of the Inda (National Institute of Steel Distributors). 'They buy steel plates because they don't have an alternative in the US, since there is no surplus of steel plates there. Or they buy steel plates paying 50% or they stop producing', he adds. Artur Bontempo, principal analyst of iron ore and steel at Wood Mackenzie, thinks similarly. 'These tariffs tend to have a negative effect on the American market, tending to generate inflationary effects and loss of competitiveness for partners, since the US imports about a quarter of the steel consumed'. 'But Trump's political message has been given; now, the real impact will depend on the response of the American industry, which knows that its competitiveness cannot be sustained solely based on tariff protection.' It is a fact that if the final price of the plates, including tariffs, makes it impossible for Americans to buy in bulk, Brazilian steel companies installed in Brazil must be affected. Specialists point out that the Brazilian market does not have the capacity to absorb the current production exported. ArcelorMittal, for example, exports almost all its plate production in Ceará, where the plant employs almost 6,000 people. The same happens with Ternium's plant in Rio de Janeiro. A professional following the issue closely told a report that reducing production would require shutting down high furnaces, which is also costly for companies. Therefore, it is uncertain how much Brazilian steel companies can maintain the price drop. Probed, ArcelorMittal and Ternium refused to comment. The Brazilian Steel Institute, which represents steel companies installed in the country, stated that it received the tariff increase with great concern. 'The measure intensifies protectionist practices and compromises the stability of international steel trade', it stated in a note. 'The demand for this input will not be met internally in the short term, making the imposition of additional tariffs detrimental, both for Brazilian exporters and for American industrial sectors.' The Brazilian government's strategy remains the same as when tariffs were 25%: negotiating export quotas with the White House. The government's view is that if the US reduces its imports, it will be harming its own market, as it is unlikely that Americans can create a steel plate production structure with the necessary speed to compensate for a potential decline in imports. Additionally, the United Kingdom, the only country not affected by the 50% tariff, does not have sufficient production to supply plates to the US in the short term. In December, the month when they exported the largest quantity of plates to the US, the total did not even reach 1,000 tons. On the other hand, the government has registered a significant decline in the quantity of finished steel sold to the US, precisely because it is a product that is currently in stock in the American market.
https://jornaldebrasilia.com.br/noticias/mundo/tarifas-de-50-podem-reduzir-ainda-mais-o-preco-do-aco-brasileiro-que-chega-aos-eua/