--Usiminas has been bringing new major equipment on stream since
last year
--Steelmaker increasing domestic, export sales
--Weaker real facilitated second-quarter exports
(Adds details of new equipment, slab exports to Ternium in
Mexico and national content, in the second, seventh and eighth
paragraph.)
By Diana Kinch
RIO DE JANEIRO--Brazilian steelmaker Usinas Siderurgicas de
Minas Gerais SA (USIM5.BR), or Usiminas, will achieve annual costs
savings of 50 million Brazilian reais ($24.51 million) with the
current modernization of its steel mills, Chief Executive Julian
Eguren said Tuesday.
The company is bringing a new hot-strip rolling mill with
capacity of 2.3 million metric tons a year into commercial
production this quarter; during the second quarter, Usiminas phased
out some older casting and coke-oven equipment, Mr. Eguren told
analysts during a conference call. Last year, new galvanizing and
heavy-plates-production capacity was brought on stream.
Usiminas, Brazil's biggest flat-steel-products producer, late
Monday reported a second-quarter net loss of BRL87 million,
reversing its year-earlier gain of BRL157 million, due largely to
currency factors. However, the company's productivity improved as a
result of the new equipment and cost-saving initiatives amid a
slowing of domestic demand for steel products and a market
situation which continues to be difficult in Brazil and
internationally, Mr. Eguren said.
Crude-steel output at the company's Ipatinga and Cubatao works
increased 10% from the previous quarter to 1.8 million metric tons,
and both domestic and export market sales rose. The Brazilian real
depreciated 10.9% against the U.S. dollar during the quarter,
facilitating exports and reducing the attractiveness of
dollar-priced steel imports into Brazil.
"We are competing with imports and gaining efficiency," Mr.
Eguren said. "Our challenge now is to increase margins."
Brazil's market for steel is likely to remain stagnant this
year, he said.
With uninspiring prospects in the domestic market, Usiminas more
than doubled exports in the second quarter from first-quarter
levels, to 561,000 tons of products. This included the sale of
steel slabs which had been held in inventory, 80,000 tons of which
were sold to steelmaker Ternium SA (TX) in Mexico. Ternium is one
of the controlling shareholders in Usiminas.
Usiminas' vice president of sales, Sergio Leite, said the start
up of more modern equipment at Usiminas is allowing the company to
produce higher-value products, which can command higher prices. Use
of the company's high-value products, including heavy plates,
rolled strip and galvanized steel, will in turn aid oil, gas and
automotive producers in Brazil in complying with the government's
national-input targets in their products, according to Mr.
Leite.
Write to Diana Kinch at diana.kinch@dowjones.com.
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