A domestic steel price hike by Brazilian steelmakers is being considered possible, but implementation should be difficult and sustainability is questionable, according to a new report by UK bank HSBC analyst Jonathan Brandt.
According to Brandt, factors impacting a possible hike in domestic steel prices are the expected weakness in international steel prices, the inflationary impact, and minimal demand growth in 2013.
In the analyst’s opinion, there are justifiable reasons to increase domestic steel prices, including steel inventories that are below average historical levels, domestic prices that are now at a discount to international steel prices, and increasing raw material costs, the report said.
“However, we believe the implementation of any price hike will be met with pushback both from the Brazilian government, which is likely to be concerned about the inflationary effects of a price hike and which doubled the import tariff on select steel products last year, as well as end users, as demand for flat steel in 2012 was non-existent,” Brandt said in the report.