Usiminas (USIM5), Gerdau (GGBR4) and CSN (CSNA3) may lose BRL 6 billion with government measure – Money Times

Usiminas Gerdau CSN
Gerdau would suffer an impact of BRL 730 million in 2022 and BRL 1.4 billion next year (Image: REUTERS/Alexandre Mota)

steel mills such as Gerdau (GGBR4), CSN (CSNA3) and Usiminas (USIM3) should suffer financial impacts in the region of R$ 6 billion with a possible reduction in tariffs from the import in steel by the government.

That’s what the Bradesco BBI according to various media reported the government plans this Tuesday (10).

In addition to the tariff, the government plans to announce a 10% tariff cut in the common external tariff Mercosur of several other products.

The bad news was felt by companies in their performance on the stock exchange during the day.

THE Usiminas was a bearish highlight, retreating 6.78%, to R$ 10.04, while CSN and Gerdau also recorded strong dropsfrom 5.82% to R$17.96 and 4.36% to R$26.34.

Weakening of the domestic market

According to analysts at Bradesco, the reduction of import tariffs would cause the domestic market to weaken sharply. They estimate that the premium in relation to imported material in flat steel would jump from 25% to 38%.

“If the cut is implemented, we will see potential pressure on flat steel prices as import premiums would be at much higher levels,” said the Bradesco.

The bank recalls that the government was already targeting the domestic steel industry in an attempt to stop the inflationwith import tariff cuts from 12% to 10% in November 2021 until December 31, 2020.

“This new initiative, potentially reducing import tariffs to 0%, seems drastic and took us by surprise”, says the BBI.

Impact on operating results

The bank predicts impacts on the results of companies that reach around BRL 6 billion, if fees are 0% by the end of 2023 without any compensation measure:

  • To the Usiminasthe forecast is a fall of R$ 610 million in the EBITDA in 2022 and R$ 1.4 billion in 2023;
  • THE Gerdau would suffer an impact of BRL 730 million in 2022 and BRL 1.4 billion next year;
  • And CSN’s Ebitda would fall by R$474 million this year and also R$1.4 billion in 2023.

Furthermore, in a scenario of steel import tariffs remaining at 0% permanently, the estimated impact on Usiminas’ cash flow would be 37%, at Gerdau at 18% and at CSN at 10%.

Bradesco indicates purchase

The bank, as it does not see the probability of rates remaining at zero for a long time, maintains the buy recommendation for the three companies, with a focus on Gerdau. However, it recognizes:

“The news flow in question is negative for all stocks in the sector.”

Learn more: how to declare variable income in income tax?

Check here the full calendar of 1Q22 balance sheet disclosures


THE Money Times publishes articles of a journalistic nature, which aim at the democratization of information. Our publications must be understood as announcing and disseminating bulletins, and not as an investment recommendation.

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