Market Monitor Steel Brazil 2016

Market Monitor

  • Brazil
  • Metals,
  • Steel

29th September 2016

The steel sector remains severely impacted by the ongoing domestic economic downturn, high interest rates, inflation, and exchange rate volatility.

 

  • The steel and metals sector remains severely impacted by the economic downturn (Brazil’s GDP is expected to contract 3.4% in 2016 after shrinking 3.8% in 2015). The Brazilian business environment has deteriorated while interest rates, inflation and exchange rate volatility remain high.
  • In the domestic market steel and metals mainly suffer from a massive decrease in public and private investment, especially in the major buyer industries construction and oil/gas. At the same time, exports are hampered by steel oversupply in the global market and the low competitiveness of many Brazilian businesses, even with a depreciated currency.
  • Steel and metals is a sector highly dependent on bank financing, with many businesses highly indebted. Serving those debts has become increasingly difficult, mainly due to higher interest rates and the fact that banks are unwilling to provide new credit.
  • Next to demand, profit margins have deteriorated over the last 12 months and are expected to further decline in the coming six months. Many businesses have to accept lower margins in order to preserve sales volumes.
  • Payment behaviour in the steel and metals sector is bad, as non-payments have increased in 2015 and H1 of 2016. Due to the credit crunch generated by high interest rates many businesses are stretching their payment terms. Insolvencies of steel and metal businesses have sharply increased, and a further rise in business failures is expected in the coming months.
  • Due to increasing credit insurance claims, the deteriorated business performance and increased credit risk, our underwriting stance is currently restrictive for all steel and metals subsectors.

Related Documents

Disclaimer

The statements made herein are provided solely for general informational purposes and should not be relied upon for any purpose. Please refer to the actual policy or the relevant product or services agreement for the governing terms. Nothing herein should be construed to create any right, obligation, advice or responsibility on the part of Atradius, including any obligation to conduct due diligence of buyers or on your behalf. If Atradius does conduct due diligence on any buyer it is for its own underwriting purposes and not for the benefit of the insured or any other person. Additionally, in no event shall Atradius and its related, affiliated and subsidiary companies be liable for any direct, indirect, special, incidental, or consequential damages arising out of the use of the statements made information herein.