Gerdau Chairman Warns Crippling Imports Push Brazil Steel Capacity to Unsustainable Lows

André Gerdau Johannpeter, the Chairman of Gerdau, Brazil’s largest steel producer, has issued a stark warning that the country’s industrial capacity is being crippled by a surge in subsidized foreign competition, pushing the domestic steel sector into a state of "near unsustainability." The industry is currently operating with a capacity utilization of just 60-65%, far below the 80% threshold considered essential for sustainable long-term investment and stability.

The core structural issue is a high level of foreign steel penetration in the domestic market. Gerdau estimates that nearly one-third of the steel consumed in Brazil is now imported, directly or indirectly. This import growth is largely attributed to products from China, which industry bodies say benefit from massive government subsidies, distorting global prices and making it impossible for local Brazilian mills to compete on cost. China alone accounted for more than half of Brazil’s total steel imports in the first half of 2023.

Johannpeter framed the issue as a matter of economic and social policy, asking where the jobs would remain—in Asia or Brazil. The consistently low utilization rate makes future investment projects unviable and forces existing mills to reduce staff; the company's CEO, Gustavo Werneck, noted that Gerdau has already laid off 1,500 employees to control costs amidst the competition. The steel industry, which is a foundational part of the industrial supply chain for construction, automotive, and machinery sectors, risks being dismantled without decisive government action.

The company emphasized its demand is not for blanket protectionism, but for "equal conditions" to compete against foreign steel that has received significant state support. The Brazilian government has acknowledged the pressure, implementing anti-dumping duties on some Chinese products and maintaining a quota-tariff system on a range of steel items. However, executives argue these measures have not been sufficient to solve the problem. The debate over whether to impose tougher tariffs is a flashpoint in the broader national discussion on industrial and trade policy, especially as Brazil balances the demands of its domestic industries against its vital trade relationship with China, its largest trading partner.

What it touches

The structural trade issue affects the entire industrial sector and major publicly traded companies. Gerdau (GGBR4 on the B3 exchange) is the most exposed, with the company already cutting future investment plans due to the difficult operating environment in Brazil. Other domestic steel producers, such as Usiminas, are also affected by the pressure on pricing and utilization rates, as are companies in the machinery and construction industries that rely on steel as a key input.