Steel Industry Forces Policy Clash as Brazil Fights Chinese Imports and High Gas Costs

Brazil’s powerful steel industry is driving a high-stakes policy confrontation within the government, demanding both a definitive increase in tariffs to counter surging Chinese imports and a fundamental shift in the domestic natural gas pricing strategy. The dual pressure has pushed Vice-President Geraldo Alckmin to champion the industry’s cause, putting him in direct opposition to the strategy of state oil giant Petrobras.

The first front in the battle is the flood of cheap foreign product. Brazilian steelmakers estimate that the country ended 2025 with a record 6.3 million tonnes of imported steel, a volume that significantly cut into the domestic industry’s market share. This "tsunami" of Chinese imports—which accounted for over 60% of imported rolled steel products—has already forced the government to impose temporary tariff increases and anti-dumping duties on certain categories of steel in late 2025 and early 2026 to protect local production and jobs.

The second front is the high cost of essential industrial inputs. Gustavo Werneck, CEO of Brazil’s largest steel producer, Gerdau, recently criticized the domestic natural gas price as a destroyer of industrial competitiveness. Werneck noted that the cost of gas for Gerdau’s operations in Brazil is approximately five times higher—at US$15 to US$16 per million BTU—than the US$3 to US$3.50 per million BTU the company pays in the United States, directly linking the disparity to the policy of Petrobras.

This is the core of the political mechanism: the steel sector argues that high energy costs—set largely by Petrobras—make it impossible to compete with subsidized Chinese product, even with new tariffs. In response, Vice-President Alckmin publicly backed the controversial 'Gas Release' program, which mandates the sale of a portion of natural gas by dominant market players, like Petrobras, to third parties to increase competition and lower costs for industrial users. Alckmin has called the implementation of the Gas Release "essential" for improving industrial competitiveness, especially for the brazil steel industry.

Petrobras, however, is actively fighting the proposal, arguing that the program will not genuinely increase supply or lower the final price, and has been lobbying various ministries to stall the measure. The dispute pits the government’s goal of industrial revival and lower input costs (Alckmin and the Ministry of Mines and Energy) directly against the commercial interests of the state-controlled company and its focus on maximizing revenue (Petrobras). The next major step is a public hearing on the 'Gas Release' program scheduled for October, which will determine whether the government will move forward on a policy that would fundamentally reshape Brazil’s gas market.

What it touches

The high-stakes debate over trade protection and energy market regulation directly affects key industrial assets and the oil market. Brazil's largest steel producer, Gerdau (GGBR4), and its competitors are exposed to both the outcome of the tariff debate and the success of the 'Gas Release' program in reducing the natural gas price. Petrobras (PETR4) is directly exposed to the mandatory sale of its natural gas reserves, which would disrupt its current pricing and revenue strategy for its gas segment.