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Gerdau targets renewables to move forward with decarbonization

Company will invest R$1.5bn in renewable energy to become more competitive in steel sector

11/30/2022

The announcement that Gerdau has entered into a partnership with asset-management Newave Capital (NW Capital) to purchase a 33.33% stake in Newave Energia puts the steelmaker at a new level in decarbonizing production, in addition to diversifying its business and making it more competitive in the steel sector.

The plan aims to develop new large-scale (greenfield) power generation projects with a capacity of approximately 2.5 GW, exclusively from solar or wind sources. Part of the production also aims to supply Gerdau’s industrial units in Brazil with renewable energy, as part of its commitment to reduce its greenhouse gas emissions, which are quite intense in electro-intensive sectors such as metallurgy.

Through Gerdau Next the company will invest up to R$1.5 billion of equity capital in Newave Energia, divided into two stages. In the first phase, the company will invest R$500 million in 2023, and the second phase will include an investment of up to R$1 billion, conditioned to the achievement of performance goals.

Juliano Prado — Foto: Claudio Belli/Valor

Juliano Prado — Foto: Claudio Belli/Valor

Juliano Prado, vice president of Gerdau and leader of Gerdau Next, told Valor that the business is based on the pillar of sustainability for the reduction of carbon emissions by 10% within ten years, seeking to reach 60% of energy needs through self-production. Today it is 25%.

In parallel, the company aims to reduce its greenhouse gas emissions (CO2e) of scopes 1 and 2 of its inventory, to 0.83 tonnes of CO2 per tonne of steel in 2031, a value approximately 50% lower than the global average of the steel industry.

“Today we have a designed and prospected pipeline of six greenfield energy parks. When these parks come into operation, or Newave acquires a new park, the plan is that 30% of the energy produced will go to our self-production. We are talking about Newave reaching close to 2.5 GW both in solar and wind”, he said.

The free energy market is a segment that the company is keeping an eye on to expand its business. Brazil currently has about 10,700 free consumers, but the government’s proposal that all consumers served at high voltage can opt to buy electricity from any supplier as of January 1, 2024, opens space for new competitors.

“The other 70% of the energy produced will be commercialized in the free market. We also want to have a leading role in having more accessible prices for businesses that want to buy from Newave Energia,” said Mr. Prado.

In the energy transition context, partnerships such as this one have been taking place more frequently in the electric sector, in which oil, metallurgy, and steel companies, for example, associate with other companies to have some competitive differential.

In Gerdau’s case, decreasing the cost of steel was one of the differentials to closing the deal. Besides being the most competitive in the country with a prominent place in the expansion of the system, subsidized energy sources such as solar and wind have contracting benefits to other conventional sources.

“This R$1.5 billion foreseen in our business plan for investments in Newave is equity capital. Another R$3 billion will come from the asset-management firm Newave Capital and XP, meaning we will also have third-party capital”, he states.

New projects usually have a higher risk, but with higher gains. And because it is strategic information, Mr. Prado does not reveal how much the investments will reduce production costs, but he stresses that the project gains are above the cost of capital with high double digits.

He sees the governance and the team as a differential advantage, with professionals from large energy companies, such as Siemens Gamesa and Echoenergia, among others.

This is not the only investment in renewables and the executive guarantees that it will not be the last. There are others, besides the production mix with scrap and charcoal that supply the carbonization plants in the pig iron and steel chain.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Gerdau sees positive steel demand in North America

CEO says U.S. government’s infrastructure package is likely to generate demand for 5 million tonnes of steel, which will translate into actual demand as early as next year

11/10/2022

Gustavo Werneck — Foto: Julio Bittencourt/Valor

Gustavo Werneck — Foto: Julio Bittencourt/Valor

Gerdau is optimistic about steel demand in North America and sees robust cycles ahead in the region, despite logistical and labor hurdles, CEO Gustavo Werneck told reporters in a conference call.

“The current level of incoming orders and available production capacity give us confidence for a solid demand next quarter and next year,” he said. He cited incentives to reshoring – the U.S. government’s initiative to regain industrial processes.

Earlier this year, Gerdau received many orders for industrial warehouses to deliver products online, he said. In the last quarter, however, the orders shifted to new plants built to transfer production capacity to the United States from other countries.

“The phenomenon of reshoring is already a reality in our orders,” he said, without citing numbers. Mr. Werneck said the U.S. government’s infrastructure package is expected to generate demand of 5 million tonnes of steel, which will translate into actual demand as early as next year.

He also said that no new capacities have started to compete with Gerdau, and that inflation and economic slowdown will have fewer impacts on the company’s business.

The executive cited logistics and labor as challenges. He said Gerdau has many open positions and did not need to paralyze operations. This phenomenon is expected to be solved in the short term, he said.

The logistical challenges are mainly related to labor, the executive said, citing the difficulty of finding truck drivers and concerns about truck driver strikes in North America, while the record low water level on the Mississippi River impacts scrap purchasing and, to a lesser extent, affects customer deliveries.

Mr. Werneck also said that he is following uncertainties regarding global economic growth, the inflationary impact on steel demand in the international market, and the potential slowdown in China as a result of the country’s zero-Covid policy. He is monitoring the impacts of the Russia-Ukraine war as well, particularly on production and energy costs.

“We highlight the company’s resilience in the face of uncertainties in the macroeconomic scenario and as a result of transformations experienced in recent years,” he said, citing record results in North America in the third quarter.

“Our strategy and positioning in the region have been successful in recent years, with high volumes and strong demand from non-residential, manufacturing and energy sectors,” he said.

He also highlighted strong demand for heavy-duty vehicles and energy in the specialty steel operation, as well as the gradual recovery of semiconductor inventories, favoring the resumption of the automotive industry with the Chips and Science Act in the United States.

In South America, demand remains strong for construction and industry in Argentina and Uruguay, with construction activity at a high level this year, while Peru sees a growing volume as well, especially with the construction sector.

*By Cristiana Euclydes — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Gerdau targets electric vehicles market

Group invests R$700m to produce purer steel, reduce costs and emit less CO2

10/10/2022

To modernize its technology, obtain productivity gains, and be in line with the new demands for steel with the quality required by the electric mobility industry, Gerdau is setting in motion a R$700 million investment in its Specialty Steel unit in Pindamonhangaba (state of São Paulo).

The specialty steel, unlike the long carbon steel used in construction, has as its main destination the automotive market – in Brazil, the largest share goes to heavy vehicles (trucks and buses). But it also supplies light vehicles. This market represents 80% of sales, via auto parts, auto parts manufacturers, and assemblers. The remainder 20% goes to industrial applications and wind power.

With the investment, the company installed new steel production equipment, whose essential raw material is specialty steel scrap coming both from end-of-life material and from generating sources (leftovers from customers’ industrial lines and others).

“The company is preparing and bringing forward, the new scenario in the automotive industry, with hybrid and electric vehicles. We cannot let a steel shortage happen,” says Rubens Pereira, vice president of Gerdau’s Specialty Steel division in Brazil. Furthermore, automakers are beginning to seek local or regional sources for parts supply, in order to avoid problems such as the lack of chips.

The investment includes the construction of a new building and the installation of state-of-the-art equipment, with a high level of automation, for the production of billets and blocks. “We are now making a much purer steel [clean steel] which, in addition to lower costs and higher productivity, has lower carbon emissions,” says Mr. Pereira.

“At Gerdau, we are following the evolution of demand and the technological transformation of the automotive segment. In recent years, the company has undergone a profound cultural and digital transformation, which has made it even more people-focused, digital, innovative, diverse, and inclusive,” says Gustavo Werneck, Gerdau’s CEO.

With these investments – in Pindamonhangaba, Mogi das Cruzes (state of São Paulo), and Charqueadas (Rio Grande do Sul) – the group is modernizing its specialty steel facilities in Brazil, in a R$1 billion package. Other investments will come in the next two to three years, concluding the program in 2025. Pindamonhangaba’s technological upgrade is aligned with the future perspectives of increasing the mix of electric and hybrid vehicles in Brazil, highlights Mr. Pereira.

Mr. Pereira, an electronic engineer with a degree from ITA (Aeronautics Institute of Technology) and an MBA from MIT (Massachusetts Institute of Technology), came to Gerdau two years ago. He built part of his career in consulting firms (Booz Allen and BCG). After that, he spent 14 years at Cargill and two at BRF.

The Pindamonhangaba unit, which was founded by Aços Villares several decades ago, now has a crude steel capacity of 700,000 tonnes per year, employing 2,300 people. This investment, says the executive, reinforces Gerdau’s presence in its markets, with an optimistic vision for the country’s automotive sector. “In the medium and long term, the sector will recover its production levels recovered.”

The Specialty Steel division accounts for about 15% of Gerdau’s total revenues. In the first semester, sales of 843,000 tonnes generated revenues of R$6.87 billion, adding the operations in Brazil and the United States together. The business, in Brazil, represents almost 50% of the division. The U.S. operations, which also have three steel factories, account for a little over 50%.

According to Mr. Pereira, from 15% to 20% of the production in the three Brazilian factories is exported, mainly to Argentina (half of the shipments), where important automotive clients are located. The other part goes to the U.S., Mexico, and Europe.

*By Ivo Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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