Global Steel Trade; Structural Problems and Future Solutions

The most notable case of cross-ownership involves CSN, Brazil’s largest steel maker and biggest producer
of ordinary flat steel products, and CVRD, the world’s largest iron ore producer. CVRD holds stakes in all
of Brazil’s biggest steel mills, including 10 percent of CSN, 23 percent of ordinary flat steel producer
Usiminas and 23 percent of CST, Brazil’s biggest slab producer. CSN indirectly has a significant
ownership interest in CVRD. CSN is arguably in a position to exercise significant influence in the
Brazilian steel industry generally, and the ordinary flat steel sector specifically, through its links with
CVRD and other steel producers. 20
Import Barriers Stifle Foreign Competition
Steel imports into Brazil traditionally have been extremely low. While import levels have risen somewhat in
the last five years, reaching 6.2 percent of apparent consumption in 1998, 21 domestically produced steel has
continued to fill most of
domestic demand (Chart 3-40).
Several different factors explain
16
the low level of steel imports
into Brazil, some market based,
14
others pointing to potential
12
unfair barriers to trade. 22
Market Factors. Certain
market characteristics make it
difficult to export to Brazil:
• Trade financing costs often
have made imports too
expensive because of very
high domestic interest rates.
• A number of Brazilian steel
consumers prefer making
their purchases in relatively
small quantities, on a justin-time
basis.
• Longer lead times and
Metric Tons (millions)
10
8
6
4
2
0
Source: IBS.
1993 1994 1995 1996 1997 1998
3-40. Brazilian Total Steel Imports vs. Apparent Consumption
(1993–1998)
minimum shipment quantity requirements inherent in import purchases can make import purchases a
less attractive, less practical option. 23
Import Barriers. Foreign steel makers also face several structural and procedural barriers when trying to
bring steel to market in Brazil. These import barriers, which include import tariffs and taxes, licensing
schemes, and captive distribution systems, have combined to insulate the domestic market from outside
competition, keeping domestic prices high and effectively limiting foreign competition. Thus, Brazilian
producers have been able to enjoy a significant advantage over U.S. producers and other competitors that
must face the forces of open competition in their home markets.
Import Tariffs and Other Taxes
Imports
Apparent Consumption
U.S. specialty steel industry insiders have stated that the biggest impediment to exporting their products is
Brazil’s tariff and tax structure. 24 Although import duties have been lowered over the years, they still range
from 9 percent (for carbon semifinished) to 19 percent (for seamless pipe). 25 Importers must also pay a
merchant marine tax 26 and various other taxes and fees. 27 The combination of these tariffs and taxes
discourages steel producers from exporting their products to Brazil.
102 Global Steel Trade: Structural Problems and Future Solutions