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Usiminas Advances to 16-Week High as Metals Rally, Real Declines

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-largest steelmaker by output, climbed to the highest level since April as metal prices rose and the real extended the biggest drop among the world’s major currencies.

Usiminas, as the company is known, gained 3.9 percent to 10.24 reais at 1:22 p.m. in Sao Paulo. A close at that level would be the highest since April 25. Brazil’s currency lost 1.2 percent to 2.3684 per dollar, the lowest closing level since March 2009. The real has sunk 14 percent in the past three months, driving up the local-currency receipts on companies’ overseas sales.

“Steelmakers reported good earnings, and the currency depreciation is a good thing for them,” Joao Pedro Brugger, who helps oversee 330 million reais at Leme Investimentos, said by phone. “You have to take into account that companies such as Usiminas have performed really badly this year, and now they’re making up for some of those losses.”

Usiminas has dropped 20 percent this year as the MSCI Brazil/Materials Index sank 28 percent. The stock has gained 14 percent since July 26, when the company reported second-quarter adjusted earnings before interest, taxes, depreciation and amortization of 441.3 million reais, exceeding the average estimate of 388.8 million reais among six analysts surveyed by Bloomberg.

Metals Advance

The Bloomberg Base Metals 3-Month Price Commodity Index climbed 1.1 percent today amid speculation that demand will increase in the U.S. and China. U.S. housing starts rose 5.9 percent in July, the Commerce Department said in Washington today. In China, factory output last month jumped more than estimated, data showed on Aug. 9.

The real has lost 4.2 percent this week, the most since the five days ended May 31. The currency plunged 9.4 percent in the second quarter as the Federal Reserve signaled that it would begin to scale back the U.S. monetary stimulus that has fueled demand for riskier assets.

“The current exchange rate is collaborating to improve the competitiveness of the steel industry,” Andre Johannpeter, chief executive officer of Gerdau SA, Latin America’s largest steelmaker, said in an Aug. 1 conference call with analysts.

Gerdau gained 5 percent to 16.02 reais today after Banco Santander Brasil SA recommended buying the stock, saying the company’s earnings will benefit from rising steep prices and a weakening real, according to an e-mailed research note.

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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