Form 20-F - Gerdau

in partnership with its customers, such as high cleanliness steels for application in bearings, steel for off-shore cables,
and stampable steel for screws.
Within the Brazilian market, 49.4% of sales were made to the Southeast, including the most economically
developed states of São Paulo and Rio de Janeiro. The South of Brazil, where Gerdau Riograndense and Gerdau Aços
Finos Piratini are located, accounted for 28.7% of Gerdau Açominas’ domestic sales in 2003. Sales to the South,
Southeast and Northeast represented 91.4% of domestic sales by the Group’s Brazilian operations.
Retail
Through Comercial Gerdau, and its network of 68 stores and 5 flat steel service centers, Gerdau Açominas
sells its products throughout Brazil. In addition to Gerdau products, Comercial Gerdau resells flat products of thirdparty
producers. In 2003, domestic market sales of flat steel products amounted to 322,600 tons.
Exports
In the past, Gerdau has only exported its surplus output, on the basis of its policy of giving priority to local
markets. Since 2003, due to the consolidation of its Brazilian operations and a decline in the domestic market together
with better international prices, this has changed. Last year, exports accounted for 49% of Gerdau Açominas’ total
shipments. The Company’s export marketing activities are coordinated by the Business Unit responsible for selling
the Company’s exportable products and are conducted (i) primarily on a FOB (Free on Board) basis, (ii) on a cash
basis against letters of credit from customers in more than 30 countries and (iii) directly to clients in neighboring
countries and indirectly through trading companies.
Although Gerdau Açominas deals primarily in commodity products such as rebars, it is aware of the
importance of quality control. In order to ensure the satisfaction of final users around the world with products
purchased indirectly from Gerdau Açominas, the Company’s technicians visit clients on an occasional basis to check
the quality of the products that it ships.
Due to its emphasis on exports, Gerdau Açominas Ouro Branco mill sells its output in the form of billets,
blooms and slabs and since 2002, heavy structural shapes. Billet sales in 2003 amounted to 1,888,000 tons, while slab
sales amounted to 179,600 tons, bloom sales to 92,300 tons and structural products to 33,300 tons. A significant
portion of the output of the Ouro Branco mill is assigned to Asian markets. Even after the temporary imposition of
tariffs on steel imports as a safeguard measure under Section 201, the Company continued to supply the U.S. market,
since no tariffs were imposed on the import of billets and the quotas established for flat steel were sufficient to ensure
the maintenance of supply. Most of Gerdau Açominas’ Ouro Branco mill sales to foreign markets are made directly
(approximately 80% of overall shipments by this unit).
Foreign operations
Within South America, Gerdau AZA sold 292,600 tons of finished products in 2003, representing a 10.2%
increase compared to 2002. In the merchant bar segment, Gerdau AZA has a market share of more than 50%. Rebar
sales to the construction sector increased in 2003, with the Company holding a 50% share of this market. In 2003,
rebar demand increased by 7.4%, due to important investments in infrastructure. Since the end of 2000, Gerdau AZA
has had a business unit known as AZAonLine, which services customers in Chile through the Internet. This was the
first e-commerce initiative in the steel sector in Chile. Customers can now follow their orders on the Internet, together
with product inventories, credit and payment status. They can also access their purchase records, generate quality
certificates and place orders.
Gerdau Laisa, in Uruguay, has 300 registered customers that may be classified as retail, wholesale and
consumers, which distribute Laisa’s products all over the country. Uruguayan customers may also use an e-business
channel.
Among Gerdau’s South American subsidiaries, Gerdau AZA in Chile uses a network of 150 independent
distributors to sell its products. Gerdau Laisa, in Uruguay, sells its products directly to small-consumers at varying
retail prices.
Gerdau’s foreign operations are intended to supply their respective domestic markets, with the exception of
the Canadian operations, which sell most of their production in the United States.
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