Steel N E W S BRAZIL STEEL MAY

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1 Steel N E W S 5 years 0 BRAZIL STEEL MAY th 21Edition MAY 2013 It's necessary to resume the competitiveness of the national industry The Brazil Steel Institute held the 24th Brazilian Steel savings to increase the rate of investment. For this Conference from May 8th to 9th, 2013, year of its purpose, it's necessary that the government create a 5oth anniversary. The event brought together about favorable environment, with well-defined regulatory 600 participants, among them, representatives of the frameworks, sectorial policies, legal security, steel industry, government, sectors of the metal- transparency and clear rules. mechanic chain, banks, consulting firms and. There is an excess production capacity of steel in the journalists. We counted on the presence of the world, of the order of 550 million tonnes, that tends Governor of Rio de Janeiro State, Sérgio Cabral, the to rise even more in the next years, mainly in China, Executive Secretary of the Environment Ministry, India and Middle East. However, the global steel Francisco Gaetani, the Secretary for Climate Change consumption will increase modestly and it won't keep and Environmental Quality, Carlos Klink, the up with the production growth expected. This Secretary of Biodiversity and Forests, Roberto situation is causing the lowering of international steel Brandão Cavalcanti and the President of IBAMA, prices. Volney Zanardi Junior, the Deputy Executive Secretary. Given the international scenario, exports are not the of the Ministry of Development, Industry and Foreign solution in the short and medium term. The domestic Trade, Ricardo Schaefer, the President of Enterprise steel consumption must grow to ensure the Planning and Logistics (EPL), Bernardo Figueiredo and sustainability of the manufacturing installation in the the Secretary of Economic Development, Energy, country. Industry and Services for the State of Rio de Janeiro,. The steel industry production capacity in Brazil is able Julio Bueno. to fulfill the double of its current consumption of steel Throughout the Conference there were important products without need of short term expansion. discussions, with the participation of seven. However, Brazilian steel industry and, in a general international lecturers, about the scenario of the way, the processing industry lost competitiveness in world and Brazilian steel industries, the challenges for domestic and foreign markets, due to the exchange the competitiveness of national industry and also, the rate, high tax burden and cumulative taxes, lack of world economy and perspectives. As highlights of the infrastructure and other systemic issues. program, the commemorative solemnity of the 50th. The corrections to these asymmetries are essential anniversary of The Brazil Steel Institute, when former for restoring the competitiveness of the sector. presidents and executives of the institute were However, while they don't occur, emergency honored, the launching of the 8th edition of the measures to protect trade, such as the adoption of Sustainability Report of the Sector and the results more realistic import tariffs and the requirement for presentation of one year duration of the Charcoal national content in goods consumed in the country, Sustainability Protocol. need to be adopted. Against the backdrop of the world economic. Brazil has a huge growth potential, but the situation and the unimpressive results, not only of government needs to act more effectively to remedy steel industry, but of all the processing industry in the bottlenecks especially in the area of infrastructure and country, the following messages were stressed along logistics and stimulate research, development and the debates, during the 24th Brazilian Steel technological innovation so that this growth happens Conference: in a sustainable and lasting way.. Brazil needs to increase its domestic and foreign

2 Conservative predictions to 2013 The crude steel production is expected to grow dumping, etc.) and labor cost aggravate the 5.8% this year compared to 2012, reaching 36.5 domestic industry situation. Contrary to the strategy million tonnes, according to predictions announced adopted whenever the market was doing badly, recently by the Brazil Steel Institute, during the 24th Brazilian steel mills can't resort to foreign sales. Brazilian Steel Conference, held in Rio de Janeiro. On the international scenario, there is excess Domestic sales are estimated in 23.3 million tonnes, capacity of 587 million tonnes, in 2013, according to which means 7.6% more than last year, but the prediction of the Worldsteel Association. Steel apparent consumption will rise to 26.2 million consumption is stagnant in developed countries - tonnes (+4.2%). Brazilian steel exports should be 8.9 especially Europe, the United States and Japan million tonnes this year, 8.8% less than last year's. while China slows its growth pace. It has become a The predictions of the Brazil Steel consider GDP major steel exporter. That's to say, the way for growth of 3.7%. However, the Focus points to resumption of growth is in Brazil. The domestic 3%. In the beginning of 2013 it showed signs of market needs to grow and the Brazilian steel industry slowing down. is prepared for that. We have production facilities In the first quarter, the apparent consumption technologically developed and updated, qualified of steel products fell 1.7%, because the direct workforce and currently low level of use that allows imports decreased 15.4%. Domestic sales have not providing twice the current consumption of steel increased proportionately with the fall in imports. without immediate expansion. They rose only 1%. Indirect imports of steel The solution for the recovery of the Brazilian contained in goods, increased (16.6%), which steel industry depends on, consequently, the signals the transfer of income and jobs for other correction of asymmetries (exchange rate and taxes), countries and the deepening of Brazilian steel realization of investments in construction and industry difficulties. There was loss of infrastructure improvement. Furthermore, it's competitiveness in both imports and exports. necessary to ease the burden on the production The appreciation of the Real, a high tax burden, chain, and more effective acts to protect trade. insufficient infrastructure and inefficient logistics, as Today, all the countries facing the crisis that lasts well as the high cost of energy and natural gas, since 2008 seek access to the market and precisely predatory competition of some countries, (subsidies, trade protection. 2

3 The Brazil Steel Institute turns 50 years old and pays tribute to the leaders who took part in this story. The first day of the 24th Brazilian Steel Conference was marked by the commemoration ceremony for the 50th anniversary of the Brazil Steel Institute. Created in May, 1963, the entity brings together and represents the steel producers in the country and acts to promote the development and competitiveness of the sector. The CEO of the Institute, Marco Polo de Mello Lopes highlighted the credibility of Brazil Steel with stakeholders, the ethics in the presentation and defense of the industry demands and the ability to adjust to the changing scenario in Brazil and abroad. Marco Polo emphasized the work of the technical committees, the cooperators team of the institute, the strategic plan with clear objectives and the partnerships for seeking solutions to the problems of the sector, as some of the elements that contributed to the successful history of the Steel Brazil. In all, 15 leaders were honored to have been part of the history of the Institute over these 50 years: HONOREES ADEMAR DE CARVALHO BARBOSA (represented by Ademar de C. Barbosa Filho) ALBANO CHAGAS VIEIRA ANDRÉ B. GERDAU JOHANNPETER ANTONIO ERMÍRIO DE MORAES (represented by Antonio Ermírio de Moraes Filho) ANTONIO JOSÉ POLANCZYK FABIANO PEGURIER FLÁVIO ROBERTO DA SILVA AZEVEDO (represented by Conselheiro Alexandre Lyra) FRED WOODS DE LACERDA JORGE GERDAU JOSÉ ARMANDO DE F. CAMPOS (represented by Conselheiro Benjamin) LUIZ ANDRÉ RICO VICENTE MARCO POLO DE MELLO LOPES MARIA SILVIA BASTOS MARQUES PAULO DIEDERICHSEN VILLARES PLÍNIO OSWALDO ASSMANN years 33

4 Institute shows the results of the Charcoal Sustainability Protocol and launches the Sustainability Report 2013 After a year of the launch of the Charcoal Protocol, through which the industry reaffirms its commitment to sustainability, the Brazil Steel Institute presented, during the 24th Brazilian Steel Conference, in Rio de Janeiro, the measures and initiatives of the associated companies during this period. In the same occasion, the President of the Board of Directors of the entity, Albano Chagas Vieira, announced the launch of the Sustainability Report of the sector. Representing the Minister of the Environment, Izabella Teixeira, the Executive Secretary of the Ministry of Environment, Francisco Gaetani, punctuated that the Minister has been engaged in dialogue with the productive sector and that the relationship with the Brazil Steel Institute has been a permanent source of learning. The dialogue is the best of the incentives, the cheapest, and our relationship with Brazil Steel has been based on this dialogue, he said. According to Gaetani, the positive evaluation by the Environmental Ministry is due to the relationship with the productive sector that integrates the agenda of the country's development. We want to deepen our partnership, he concluded. The report, with the Protocol results, is already available to download f r o m t h e w e b s i t e o f t h e i n s t i t u t e. ( blicacoes.asp). The dialogue is the best of the incentives, the cheapest, and our relationship with Brazil Steel has been based on this dialogue Francisco Gaetani - Executive Secretary of the Ministry of Environment 3 4

5 Opening of the Ceremony Sérgio Cabral Governor of the State of Rio de Janeiro Panel 1 World Steel Industry Scenario Albano Chagas Vieira - Chairman of the Board of Directors of the Brazil Steel Institute Panel Coordinator 35

6 Panel 2 Competitive Brazil Challenge - Jorge Gerdau Johannpeter - President of the Chamber of Management Policies, Performance and Competitiveness Lecturer Panel 3 Sustainability Challenges of the Steel Industry - Benjamin M. Baptista Filho Vice Presidente of the Board Panel Coordinator Special Conference Steel Industry in China: Global Changes and their Implications - Haiyan Wang Partner of the China India Institute (Instituto China Índia) Lecturer 3 6

7 Panel 4 World Economic Situation and Perspectives Carmen Reinhart Professor of Harvard University- Lecturer 24th Brazilian Steel Conference 37

8 % STATISTICS The Brazilian production of crude steel in April of tonnes (US$371 million) was recorded, totaling, 2013 was 3,0 million tonnes, down 1.6% when thus, 1,2 thousand tonnes of steel products compared with the same month in In relation imported in the year, reduction of 10.7% compared to rolled steel, April's production of 2,2 million to the same period of tonnes, increased 3.3% compared to the same The apparent consumption of steel products was month of the last year. With these results, the 2,3 million tonnes, in April, totaling 8,5 million accumulated production totaled 11,3 million tonnes tonnes, in These amounts represented of crude steel and 8,4 million tonnes of rolled steel, increases of 7.8 % and 0.7 %, respectively, in reduction of 3.6% and 0.1%, respectively, over the relation to the same periods of the year before. same period of As for domestic sales, the result of April, 2013, was 1,9 million tonnes of products, increase of 6.2% compared to April, The cumulative sales of 7,3 million tonnes, in 2013, showed growth of 2.3%, comparatively to the same period of the year before. The exports of steel products reached 817,000 tonnes, in April, 2013, valued at US$ 540 million. With this result, exports totaled 3,3 million tonnes and US$ 2,1 billion representing decline of 3.7% in volume and 13.2% in value compared to the same period of the previous year. Regarding to imports, the volume of 330 thousand PRODUCTION OF CRUDE STEEL J F M A M J J A S O N D MONTH J F M A M J J A S O N D Brazil Steel Institute Telephone (21) acobrasil@acobrasil.org.br