The Gerdau Group prioritizes investments in steel projects that offer the best return on capital, consistent with our vision of economic, environmental and social sustainability.
Over the last five years, resources used for the technological upgrade of the Group's industrial installations have averaged US$ 239.2 million per year, ensuring that units operate with the most advanced equipment in their sector. Historically, the volume of investments has exceeded operating asset depreciation levels, guaranteeing that the units continue to grow in competitiveness and economic efficiency.
In 2003, US$ 294.7 million were invested in modernization and expansion. Especially noteworthy are the growth of the operations in Brazil and the acquisition of assets that ensure access to raw materials.
The Gerdau Group consolidated a strategic position in relation to iron ore by acquiring assets that translate into the possibility of carrying out its own mining operations in the future. The US$ 30 million transaction ensures the long-term supply of this raw material.
These iron ore reserves are estimated at 500 million metric tons. Complementary surveys will be carried out to detail the full potential of the mines, located at Miguel Bournier, Várzea do Lopes and Gongo Soco in the state of Minas Gerais. A total of 15 extraction concessions are applicable to an area of 7,000 hectares.
In 2003, the output of pig iron, another raw material, was increased to 3.9 million metric tons per year. Through an US$ 18 million investment, the Group acquired control of the Margusa mill, located in Bacabeira, state of Maranhão. The unit has a production capacity of 200,000 metric tons of solid pig iron per year.
This investment optimizes cost-efficiency, given the plant's privileged location close to Carajás, source of the iron ore that is its main input, and to the port, which will simplify shipments to Gerdau mills in Brazil's northeast and the United States.
In the United States, Gerdau Ameristeel increased its supply of higher value-added products, as of the first quarter of 2004. Gerdau Ameristeel acquired the assets of Potter Form & Tie Co., which for more than thirty years has been a leader in the supply of fabricated rebar and other materials for the reinforced concrete industry in the Midwest. With this investment, Gerdau Ameristeel adds another six units, in Belvidere, Urbana and Decatur (state of Illinois), Madison and Appleton (state of Wisconsin) and Eldridge (state of Iowa).
New programs for technological upgrades are also under way with the aim of meeting domestic demand, especially at Gerdau Riograndense, Gerdau Aços Finos Piratini (both in the state of Rio Grande do Sul) and Gerdau Usiba (state of Bahia). The production capacity of the latter two will be increased. Over the next four years, Gerdau Aços Finos Piratini will boost its production capacity from 300,000 to 500,000 metric tons of finished products. By 2007, Gerdau Usiba will expand its steel production capacity by 20%, to 600,000 metric tons per year, and its rolled products capacity by 25%, reaching 500,000 metric tons. Output of sponge iron, one of the main raw materials in the steelmaking process, will grow 33%, to 600,000 metric tons per year.
In the information technology area, the implementation of several new functionalities in the management system is underway in Brazil. These tools add competitive advantages in customer and supplier relations and in supply chain management, and allow each user to customize existing resources and ensure greater agility and productivity in their work.
Gerdau Ameristeel databases were linked into a single data system in 2003. A team of specialists is currently working on the consolidation of the system in the scrap area, which will simplify purchasing of this input and reduce costs.