Brazil's steel market is under pressure from unpredictable demand, high stocks, rising interest rates and volatile currency fluctuations. In response, Brazilian companies are revising their sales and profit targets to adapt to increasingly challenging conditions.
Aco Cearense is one of Brazil's largest flat steel importers and is the controlling shareholder of long steel producer Sinobras. The Fortaleza-based company supplies steel to over 16,000 small to medium-sized companies across Brazil.
Vice-president Ian Correa spoke to Argus about Aco Cearense's cautious strategy to navigate an oversupplied market, with demand threatened by tariff disputes and high interest rates. The interview was conducted in Portuguese and has been translated into English.
What is Aco Cearense's expectation for steel prices in 2025?
The company is not expecting prices to rise. Prices may stay flat or even fall further, rather than increase. We expect a seasonal increase in sales in the second half of the year, but this will most likely not translate into higher prices.
This outlook is driven by factors such as elevated inventories across the industry and the delayed impact of high interest rates, which are expected to fully affect the market within 4-5 months. While we expect sales to remain stable, lower prices are likely to narrow margins, which could result in profits falling short. Our initial forecast for 2025 projected a 10–12pc profit increase over the year, but shifting macroeconomic dynamics have prompted us to put our guidelines under review.
As an importer, what is your perspective on Brazil's 25pc tariff-quota policy?
When the import quotas were introduced in June 2024, Aco Cearense did not complain. Instead, we chose to adjust our costs and our prices based on the new regulations, as we believe the entire market will eventually adjust. The quotas are a mechanism to help regulate the market and to remove amateurs from the business.
The renewed quota regime is now more restrictive, covering a broader range of imported steel products and capping volumes eligible for reduced duties. Could this lead to higher prices for consumers?
As a company, we must adapt and absorb at least part of the rising import costs. We will not pass the full costs on to our customers, simply because consumers are unwilling to pay more under the current market conditions. In the end, the market commands prices.
Import prices are lower and the dollar is weaker compared with the start of the year. Do you perceive this combination as an opportunity to buy low and sell high?
The market is currently too volatile and risky for opportunistic strategies. For importers, exchange rates are just as critical as product prices, and the dollar has shown significant instability in recent months. We continue to operate on a spot-transition basis, committing to buy just enough to keep our stocks running smoothly. We currently process and sell about 45,000 t/month of flat steel, maintaining a 4-5 week available inventory.
Some inexperienced market participants fall for the promise of a buy-low, sell-high dynamic that does not always play out as expected. This often leads to oversupply and steep price declines. When these opportunistic buyers realise they cannot sell their stock, they rush to offload inventory, slashing prices and harming the entire market.
How is your sourcing split between imports and domestic supply?
Before the pandemic, we sourced almost exclusively from domestic suppliers. Today, we import at least 80pc of the flat steel we process and sell. It is more expensive to bring coil from Sao Paulo to Fortaleza than to bring it from China to Fortaleza. There is a high cost in doing business in Brazil, which includes expensive freight and local taxes. Imported steel is often up to 30pc cheaper and many companies can still import at lower prices than domestic options, even with the 25pc tariff. Our decision to import is cost-driven to keep our products at competitive prices.
