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4-Traders Homepage  >  Equities  >  Bolsa de valores de Sao Paulo  >  Companhia Siderurgica Nacional    CSNA3   BRCSNAACNOR6

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Companhia Siderurgica Nacional : Brazil CSN 'Extremely Positive' On Steel In Coming Months

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05/11/2012 | 09:43pm CET

--CSN plans to raise product prices 5%-7%

--Steelmaking to invest heavily in iron ore port expansion

--CSN set to become Brazil's biggest cement producer

(Updates with steel exports not being competitive in fifth paragraph, data on steel imports into Brazil in ninth paragraph, port operations in 11th.)

   By Diana Kinch 

Brazilian steelmaker Companhia Siderurgica Nacional SA (CSNA3.BR, SID), or CSN, is "extremely positive on the outlook for steel for the coming months," a company director said Friday.

Profit margins on steel, pinched in the first quarter, are growing at CSN as international prices for key steel-making materials--including the coal and coke purchased by the company--have fallen in the second quarter, CSN sales director Luis Martinez said on a conference call. Prices for iron ore, which the company gets at its own mines, are seen remaining relatively stable, he said.

At the same time, Brazilian steel demand is growing, in some sectors by some 5%-6% a year, while flat steel imports into Brazil are likely to halve from 2011 to about 1 million to 1.2 million metric tons this year, "allowing local players to rebalance," Martinez said.

The current depreciation of the Brazilian real against the dollar is "very favorable" for CSN, Martinez said. The weaker real is seen as a disincentive to imports and may reduce local costs.

However, the real hasn't yet weakened to the level where it makes Brazilian steel really competitive on export markets, the executive said. CSN plans to sell at least 85% of its steel output of over 5 million metric tons this year on the domestic market, he said.

In this scenario, it is possible to glimpse the possibility of flat steel product price rises of 5%-10% in the domestic market, he said. Specifically, the company hopes to raise its steel products prices by 5%-7% by the end of the second quarter, with the price rises to be more prominent on hot rolled band and coated products, including galvanized steel and tinplate, Martinez said.

"However, it's not only a case of raising prices," Martinez said. "We have also to recover our product mix, our share on galvanized and tinplate products."

As steel imports into Brazil are expected to fall this year, partly due to the weakening of the Brazilian real, Brazil's flat products steelmakers may be able to win back sales of some 100,000 metric tons a month from imports, the executive estimated.

Imports of flat steel products into Brazil towered to a record 4 million tons in 2010, according to Brazilian Steel Institute IABr. Imports fell back to 2.27 million tons in 2011 as local demand became more volatile amid the uncertainties of the European economic crisis and Brazilian mills cut product prices to compete with imported goods.

After halving again this year, Brazilian flat steel imports may fall further in 2013 when the government axes import tax incentives on steel products which are currently given in some Brazilian states, according to CSN executives on the call.

CSN's mining director Daniel Santos said CSN is forging ahead with investments on expansion of its Itaguai iron ore export terminal in Rio de Janeiro state, which currently has the capacity to export 32 million tons of iron ore from the company's Casa de Pedra and Namisa operations. Capacity is planned to rise to 45 million tons annually by late 2012, 60 million tons by late 2013 and 84 million tons by the end of 2015.

CSN is also studying the possibility of bidding to operate the "Area do Meio" , or "Middle Area" port area that should be put up for auction by Brazil's federal government in the near future, Santos said. "It's on the radar," he said.

The area is located between CSN's Itaguai port existing port, and a port operated by mining company Vale SA (VALE, VALE5.BR). Steelmakers ArcelorMittal (MT) and Usinas Siderurgicas de Minas Gerais SA (USIM5.BR, USZNY) recently said they plan to form a consortium to bid for the area to facilitate exports of the iron ore they produce in Minas Gerais state.

CSN is also expanding its position in cement, Martinez said. This year CSN plans to produce 2.4 million tons of the construction material, expanding to 8 million tons in three years' time, when it will become Brazil's second biggest producer, he said.

The steelmaker will also move into long steel products production for the construction industry, which has synergies with its cement business, in first-quarter 2013, he said.

-By Diana Kinch, Dow Jones Newswires, 55 21 7564 4495 diana.kinch@dowjones.com

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Financials ( BRL)
Sales 2016 16 948 M
EBIT 2016 2 194 M
Net income 2016 -1 012 M
Debt 2016 24 988 M
Yield 2016 0,03%
P/E ratio 2016 -
P/E ratio 2017
EV / Sales 2016 2,29x
EV / Sales 2017 2,04x
Capitalization 13 875 M
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Mean consensus UNDERPERFORM
Number of Analysts 12
Average target price 7,21  BRL
Spread / Average Target -28%
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Benjamin Steinbruch Chairman & Chief Executive Officer
Paulo Rogério Caffarelli Principal Financial Officer
Fernando Perrone Independent Director
Yoshiaki Nakano Independent Director
Antonio Bernardo Vieira Maia Independent Director
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