On Wednesday April 26, the Luxembourg-based steelmaker announced the purchase of a controlling stake in Belgian wire producer Bekaert’s Sumaré tyre cord plant in Brazil’s south-eastern São Paulo state.
This deal followed February’s acquisition of Votorantim’s units in the cities of Barra Mansa and Resende
, as well as Votorantim’s 50% stake in rebar producer Sitrel, a joint venture with Brazil-based Grendene, by ArcelorMittal’s Brazilian subsidiary.
Under the new agreement, ArcelorMittal will own a 55.50% stake in the Sumaré unit, with the other 44.50% remaining with Bekaert.
The Sumaré facility produces steel cord and bead wire goods, which are used in the manufacture of car and truck tyres.
“Even though the [Brazilian] car sector has registered declines in activity, the tyre market has not been affected because tyres have to be renewed,” Jefferson de Paula, ceo of ArcelorMittal’s Long Carbon Central & South Americas operations, told Metal Bulletin on April 26. “We see a [good] future for the automotive industry.”
The deal with Bekaert is in line with ArcelorMittal’s strategy to raise production of high-added-value steel goods, de Paula said.
“The partnership will also allow the company to increase productivity and reduce costs through its potential synergies,” he added.
The Sumaré tyre cord plant will now be fully fed by wire rod produced by ArcelorMittal, “if our products meet the specifications required by the clients”, according to de Paula.
ArcelorMittal already has similar partnerships with Bekaert at two other plants in Brazil – Itaúna and Vespasiano, both in Minas Gerais state.
The Sumaré, Itaúna and Vespasiano units have a combined output capacity of 100,000 tpy of tyre cord products.
Of this total, around 60-70% is aimed at meeting Brazilian demand, while the remaining volume is designed to be exported to Latin American countries, de Paula said.
Long steel market
Earlier this week, the Brazilian steel institute, Aço Brasil, reduced its forecast for steel sales in 2017
, due to the weak performance of the country’s economy.
Brazil’s economic recovery is taking longer than expected, according to the institute.
De Paula said that ArcelorMittal started the year more optimistic about the domestic construction sector, but the firm now views the sector’s performance “with much pessimism”.
“At the beginning of the year, we thought that [the construction sector] would improve, but now we believe it will stay flat,” he added. “The Brazilian economic fundamentals are improving, but the real economy has yet to get better.”
The benefits of new construction work take from six to twelve months to reach the steel industry in terms of demand, according to de Paula.
“A rebound [in long steel consumption in Brazil is expected] only next year,” he said.
Metal Bulletin’s monthly assessment for domestic rebar prices in Brazil was stable in April compared with the previous month, at 3,250-3,410 Reais ($1,028-1,078) per tonne delivered.
Meanwhile, export prices for Latin America-origin long steel products were all unchanged during April, due to the lack of trading activity.
Metal Bulletin’s weekly price assessments for rebar and wire rod exports in the region were both $440-450 per tonne fob on April 21.