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Brazil steelmakers shut down blast furnaces as coronavirus hurts demand

·2 min read

By Alberto Alerigi

SAO PAULO, April 3 (Reuters) - Brazil steelmaker Gerdau on Friday announced several production cuts, including temporarily shutting down one of its blast furnaces, following in the footsteps of its domestic competitors as the coronavirus outbreak has harmed demand.

Overall, Brazil's steelmakers have been cutting down on steel production since the outbreak began affecting markets. Now, automakers have suspended car manufacturing, homebuilders are stalling, there is a lack of significant infrastructure projects and Brazilian consumers fear widespread unemployment.

But blast furnaces were built to work uninterruptedly, and shutting them down is one of the more radical measures that a steelmaker can take in times of crisis.

In the past few days, in addition to Gerdau, Usinas Siderurgicas de Minas Gerais said on Thursday it would shut down two more blast furnaces, bringing the total to four. Only one remains operational.

Rival ArcelorMittal has begun to shut down one of its blast furnaces, which adds to another one that had been on hiatus since last year.

Gerdau said on Friday it would shut down a blast furnace with an annual capacity of 1.5 million tonnes. Its remaining furnace has an annual capacity of 3 million tonnes.

Companhia Siderurgica Nacional has been able to keep its operations in Rio de Janeiro thanks to the construction industry. But a source familiar with the situation said the company is studying the current scenario.

"Shutting down a blast furnace is a delicate matter, but it might end up happening with everybody," the source said.

Analysts at Credit Suisse said in a report about Usiminas, as the company is known, that market conditions are expected to be weaker in the future, coupled with higher costs.

"Carrying out the shutting down of a blast furnace is expensive," the analysts wrote. "Turning them back on and managing them until they reach optimal production levels can take weeks, if not months."

Usiminas's capacity is now about of about 2.35 million tonnes of steel per year. But it could produce up to 9.5 million tonnes if it had all its blast furnaces operating.

ArcelorMittal said it does not know for how long its blast furnace will remain shut down, and that any decision depends on market conditions. (Reporting by Alberto Alerigi Jr; editing by Grant McCool)