Above-average inventory levels will likely keep steel prices in Brazil under pressure in the coming months, steel distributors' association Inda said.
Steel inventories reached 1.07mn metric tonnes (t) in May, up by 17pc from a year earlier, Inda said last week. The volume represents 3.3 months of available inventory, above the historical average of 2.9 months, which could fuel buyers' leverage to negotiate discounts in their favor.
Hot-rolled products account for 685,000t of the stock, a 22pc increase from a year prior.
Argus-assessed hot-rolled coil (HRC) cfr Brazil prices dropped to $507-525/t on 25 June, down from $520-540/t in early June. HRC import prices have fallen by nearly 5pc year-to-date.
Buyers have been holding off on new purchases in the past three weeks, waiting to see if demand stays strong enough to bring down stock levels.
Sluggish demand has driven domestic mills to regularly offer discounts on spot transactions since April. The ex-works Brazil HRC price remained flat at R3,800–4,000/t last week because of slow trade.
Higher financing costs also threaten to reduce demand further in a market that relies heavily on credit. Brazil's central bank increased interest rates to 15pc on 18 June, the highest level in 20 years.
Increased interest rates tend to weaken sales in the construction, automotive and household appliance sectors, eroding domestic steel demand.
Imports threaten domestic upside
Rising imports and falling international prices are also pressuring domestic prices. Import levels could hit another record in 2025 despite the government's recent renewal of its 25pc quota-tariff system on steel, distributors said.
Imports reached an all-time high of 5.9mn t last year, with 70pc originating from China, according to industry chamber Instituto Aco Brasil.
Quota volumes for 2025-2026 period are tighter and include more products, triggering the 25pc tariff for an additional 300,000t of steel from volumes set for the 2024-2025 cycle].
Still, many steel distributors and service centers have been paying the 25pc tariff because import price discounts offset the higher duties, Inda president Carlos Loureiro said.
Flat steel imports surged to 418,000t in May, up by 71pc year-over-year, Inda said. The association import figures include heavy plates, HRC, cold-rolled coil, hot-dipped galvanized, electro-galvanized, pre-painted and galvalume sheets.
Additional imports are about to enter the market after customs workers paused a strike in early June, after six months of import and export paperwork delays. The strike to demand a 28pc salary raise contributed to a build-up of cargoes stuck at Brazilian ports.
At least 350,000t of various grades of steel coils were waiting to dock and unload at Brazilian ports by the last week of June, tracking data shows.
Sales outlook optimistic
Inda estimates a 4pc rise in June sales volumes from May, despite current higher inventories levels and declining prices.
The forecast takes into account historical June trends and early feedback from Inda's members on how sales began this month.
Flat products sales reached 329,000t in May, up by 4pc from a year earlier, when Inda's members sold 315,600t.
Purchases exceeded sales by 10,000t, further inflating inventory levels. Total purchases climbed to 339,500t last month, 8pc higher than 314,300t recorded in May 2024.
But some import traders disagree with the Inda's forecast, saying that demand remains weak and is unlikely to rise in the coming weeks.
