- Government is said to plan measures to protect local industry
- Gerdau, CSN are also among biggest gainers in Brazil Wednesday
Usinas Siderurgicas de Minas Gerais SA, Latin America’s top producer of steel used by automakers, surged the most in three years on a newspaper report the government is planning an increase of steel import taxes.
Non-voting stock of Usiminas, as the steelmaker is known, rose 15 percent to 2.84 reais as of 2:48 p.m. in Sao Paulo. The company, based in the city of Belo Horizonte, sells about 73 percent of its steel production in the domestic market. Competitor Gerdau SA climbed 9.3 percent and Cia. Siderurgica Nacional, known as CSN, added 18 percent.
President Dilma Rousseff has ordered the ministry of finance and the ministry for manufacturing and trade to study measures to protect the local steel industry, Folha de S.Paulo said without disclosing the source of the information. The ideas include boosting the tax on steel imports to between 5 percent and 20 percent from 8 percent to 14 percent, the newspaper said.
Raising steel import taxes is a possibility because of the impact of excessive global supply on domestic producers, Finance Minister Joaquim Levy told reporters in Brasilia Wednesday.
The local industry has been suffering from a drop in domestic demand as Brazil heads toward its longest recessions since the 1930s and prices fall because on supply from China, according to investment bank Grupo BTG Pactual.
"The situation is so concerning for the industry that we think a higher tariff would provide some relief," Leonardo Correa and Caio Ribeiro, analysts at BTG Pactual, wrote in a note to clients dated Wednesday.
Usiminas’s credit rating was cut by both Fitch Ratings and Moody’s Investors Service as its net debt rose 51 percent in the third quarter of this year compared to the same period in 2014. The steelmaker has also announced the closing of one of its plants in Brazil Oct. 29 as its losses deepen.