Early months of Trump’s administration, high interest rates in Brazil are key for company’s strategy
01/21/2025
Gerdau has developed a conservative plan for 2025 to navigate the early months of Donald Trump’s administration and the high interest rate environment in Brazil. In an interview with Valor, CEO Gustavo Werneck said the company is prepared to operate in any scenario, even the most complex ones.
“Gerdau believes that under the Trump administration, the industry in general, including the steel sector, has the potential to perform well in the medium term. However, we do not expect Trump’s measures to significantly impact our sector in the very short term,” he said.
According to Mr. Werneck, Gerdau’s operations in the U.S. market have seen improvement since Mr. Trump’s first term. The United States accounts for about 40% of the steel group’s revenue.
In the U.S., Gerdau produces long steel products (used in the infrastructure industry), including rebar. “Everything we produce there is consumed by the U.S. market. Interestingly, in recent years, our performance in the United States has surpassed that in Brazil. We will observe the impacts of the first months of Trump’s administration to understand the outlook for the second half of the year.”
In Brazil, steel imports remain the primary challenge for the national industry, particularly from China, despite the implementation of tariffs, according to Mr. Werneck.
The steel sector, according to the CEO, continues to engage in discussions with the Brazilian government to address the persistent import issue. “The government has been very open to the industry. Therefore, our current debate focuses on what additional measures should be taken to reduce the penetration of imported steel.”
He said that historically, imports represented about 10% of the total in the country—now it stands at 25%. The expectation is to discuss additional measures.
The weak Brazilian real scenario is favorable for Gerdau, the executive note. On the other hand, the exchange rate and current interest rate levels raise concerns about the economy. He noted that the construction sector is performing well, but there is concern about prospects for real estate financing. “Will it continue to generate demand from the second half onward?” the executive questions. He sees the same situation in the automotive sector.
Gerdau plans to maintain its investment schedule both in Brazil and abroad. Mr. Werneck did not provide details on the amount but mentioned that Gerdau invests around R$5 billion to R$6 billion annually. According to him, the company has always maintained a trusting relationship with the country and intends to continue its growth plans.
An exception will be in Mexico, where the company already has a strong presence but had planned to invest in a new plant—an investment estimated at $600 million. The group plans to wait a few more months to assess the commercial relationship between Mexico and the United States before making a final decision on the new investment.
In the U.S., the expectation is to continue investments in the group’s plant in Texas.
Gerdau currently has no plans to shut down additional capacities in Brazil. Last year, the group halted operations at the Barão de Cocais plant in Minas Gerais. An important new rolling mill is expected to be inaugurated in Ouro Branco, also in Minas Gerais. “This is an important investment for us, even in the face of predatory imports of hot coil in Brazil at the moment,” the CEO said.
Currently present in seven countries (down from thirteen), Gerdau does not intend to withdraw from any of its current locations.
With low debt levels, the company is set to complete its share buyback program this year and will evaluate in the coming months whether to extend the program.
Mr. Werneck emphasized that having low leverage (a debt-to-EBITDA ratio of 0.32 times) is important and healthy in the current high-interest-rate environment in the country. “Over time, we will continue to analyze opportunities for acquisitions and consolidation in the countries where we operate.”
For the executive, the group has been doing its homework. “This year, we will focus internally, seeking greater efficiency,” he said.
*By Mônica Scaramuzzo — Davos
Source: Valor International