London (Platts)--8Nov2012/302 pm EST/2002 GMT
Brazilian steel mills continue to operate at low rates, with no real changes in output since September, industry sources said Thursday. Usiminas, with two main plants at Ipatinga in Minas Gerais and near Sao Paulo, is understood to be operating at 75% capacity with no increase in production expected for now. "Steel output is not improving," said a Usiminas source familiar with blast furnace operations. Spot coking coal requirements are said to be low in Brazil. A preference is for lower-priced US high-volatile and Colombian mid-volatile coals over material from Australia and Canada where needed and possible in coke blends. Blast furnace iron output fell 17% to 2.19 million mt in September from a year earlier, according to latest World Steel Association figures. Blast furnace iron production in Brazil over the October to December quarter averaged at 2.658 million/month based on worldsteel data, implying output must rise from September to prevent annual contractions. ArcelorMittal, which operates steel mills in Brazil and supplies iron ore and coking coal, is concerned about the recent severe year-on-year drop in Brazilian output, a company official said. Brazilian steel demand may not increase until after the Carnival celebrations, which next year will be held February 9-15, said a source at another steel producer. The source said planning and resumption of forward purchasing only kicks in to a great degree after the break, likening it to the effect of the Chinese New Year for that country's economy. Meanwhile, ArcelorMittal Tubarao, which shut its biggest 3 million mt/year blast furnace No. 1 for a revamp earlier this year, was testing it as of October, and had not yet restarted commercial production. The No. 2 furnace, mothballed a couple years ago due to weak demand for slabs, was gradually brought back online in March to produce 1.3 million mt/year of iron. The third unit at the site has an annual capacity of around 2.8 million mt and is due to undergo maintenance at the hot blast stove when the No.1 comes back.--Hector Forster, hector_forster@platts.com --Edited by Kevin Saville, kevin_saville@platts.com