Gerdau Boosting Output

Brazilian steelmaker Gerdau announced plans to increase crude steelmaking capacity in Brazil to 11.7 million metric tons a year by 2007 from today's 7.5 million metric tons per year figure, according to company investor relations director Osvaldo Schirmer.

The expansion plans will increase the company's flat steelmaking capacity in Brazil to 6.6Mt/y from the current 4.7Mt/y, Schirmer said during a conference call to discuss the company's second quarter results.

The projects are "firm," Schirmer said. In June Gerdau said the company could curtail some smaller investments because of slack demand for long steel and a growing political scandal in Brazil.

"The basic investments are advancing on schedule. These smaller investments could be made at a later date. This is what we wanted and this is what is happening in the current course," Schirmer said.

Gerdau, the largest long steel producer in the Americas, plans investments of $3.2bn from 2005-2007, Schirmer said. In Brazil, $1.5bn in projects are confirmed through 2007, with an additional $900,000 in development, he added.

Among the projects previously announced that Schirmer said were advancing include the expansion of the company's Acominas steelworks in Ouro Branco. The $1.1bn program will raise production to 4.5Mt/y from 3Mt/y and is due to wrap up by 2007.

Schirmer said construction is well underway at the site. "We have open holes on every side, lots of people working, equipment contracted and financing secured," he said.

In addition the company's new mill in Aracariguama will have installed capacity of 900,000t/y and will manufacture 600,000t/y of flat steel products.

"We imagine we will start this production yet this year," said Schirmer. The mill started "experimental" production runs in July and its flat steel line is expected to start production in 1Q06.

The company also has budgeted $200mn for the Cosigua plant expansion project. Works would increase crude steel output to 1.8Mt/y from 1.2Mt/y and boost flat steel production to 1.6Mt/y from 1.3Mt/y.

Also part of the planned investments is a new specialty steel plant to serve the automotive industry. The US$388mn mill is expected to produce 800,000t of steel and 500,000t of hot rolled coils annually.

Moreover Gerdau plans to inaugurate in September the expansion of its specialty steel plant in southern Brazil's Rio Grande do Sul state, according to VP Frederico Gerdau Johannpeter.

"The demand for specialty steels continues to be very strong," Johannpeter said. "For this reason we are going to continue examining and will detail plans for specialty steel projects this year."

The $40 million project increased output at the plant to 500,000t/y from 400,000t/y and includes a new flat steel line, a new block-heating oven and improved infrastructure, Johannpeter said. BN America