Gerdau shuts down steel production at Minas Gerais plant - Valor International

Brazilian steelmaker Gerdau announced Tuesday (Nov. 3) that it will halt steel production at its Divinópolis plant in Minas Gerais state, citing a loss of competitiveness and difficulties securing iron ore at affordable prices. The commodity has faced pressure from rising ocean freight costs and price volatility.

The company said those factors had been driving up production costs at the facility.

"The situation is compounded by the growing influx of imported steel into the Brazilian market and unfavorable conditions in international markets, particularly for exports, which have historically been important to the plant's operations," Gerdau said in a statement.

The closure will have far-reaching consequences for Divinópolis, the city government said. Municipal officials estimate that about 1,000 people will be directly affected, including Gerdau employees and outsourced workers.

That figure represents roughly 7.4% of the city's industrial workforce. The plant also accounts for as much as 15% of the municipality's revenue from transfers of the state tax on the circulation of goods and services (ICMS).

Gerdau plans Brazil overhaul, buoyed by strong U.S. profitsSteelmakers see room to grow but demand trade protection

"We do not underestimate the seriousness of this decision or its consequences," Mayor Janete Aparecida (Avante Party) said in a statement. "We will step up discussions with the business community and do everything within the municipality's power, without making promises about matters beyond our control."

The Divinópolis and Regional Metalworkers' Union told news website G1 that 280 workers had been laid off following the decision, although Gerdau did not confirm the figure.

The steelmaker said it is considering transferring some employees to other facilities and offering technical training courses and workshops to help workers find new jobs and "prepare for new opportunities."

The announcement comes as Gerdau's Brazilian operations face mounting pressure from a surge in imported steel in the domestic market.

The company's third-quarter earnings, released last week, showed that its North American business once again underpinned its performance.

In the quarter ended September, North America accounted for 55.6% of Gerdau's revenue, while Brazil contributed 36.8%, down from 42.2% a year earlier.

Gerdau said it has been working to improve the competitiveness of its domestic operations and is preparing a restructuring plan to be unveiled in December. The initiative will focus on cost reductions and operational improvements aimed at boosting efficiency.

The company said Tuesday that the decision to shut down steel production in Divinópolis is consistent with that strategy.

The goal is to concentrate "steel production in more competitive, efficient and technologically advanced facilities to ensure the long-term sustainability of its business," Gerdau said in the statement.

This article was translated from Valor Econômico using an artificial intelligence tool under the supervision of the Valor International editorial team to ensure accuracy, clarity, and adherence to our editorial standards. Read our Editorial Principles.