Andre Gerdau Johannpeter, the President and CEO of Gerdau SA (ADR)(NYSE:GGB), said that last month the World Steel Association issued an update of the prediction for obvious fuel consumption for FY2016, and the following year. It is expected that 2016 will close with a 0.2% jump of international demand for steel after following a decline of 3% in FY2015. Excluding China, the stance points to a 1% rise in demand, hitting 1.5 billion tons, for FY2017, the company project a 0.5% jump in international demand for steel raising by developing and enlarging economies.
That, discounting China, should witness a 4% jump in demand. However, China should witness a 2% decline in demand for FY2017, and that is following the lower pace of economy. Besides their modest projections for the global steel consumption, the industry still has to deal with the same challenges and difficulties that they saw this year will maybe have fulfilled next year following unfair competition approaching from some nations in the global space.
Gerdau’s CEO said that additionally, the economic recession in Brazil resulted in lower steel demand. In FY2016, steel consumption is expected to decline by 14% in Brazil, possibly the lowest level ever posted in the last decade. The economy in Brazil are giving indications that maybe the worst time is already over, however, it’s worth stating that recovery will be gradual and slow.
Gerdau has taken some important steps in order to reach at a better tax balance as the current debate surrounding the proposal for constitution that limit actual jumps in public spending in added to the suggested reform of the welfare mechanism which is progressively moving forward. With all of these plans, the central bank can reduce interest rates and boost investments. For 2017, the company expects a 3.8% jump in steel demand in Brazil.
In last trading session, the stock price of Gerdau jumped more than 2% to close the trading session at $4.26.