CANADA AND THE UNITED STATES

Gerdau Ameristeel is the second largest producer of rebar and merchant bar in North America. The long steel segment represents 81.3% of the total volume sold by the company. Special section profiles, higher value-added long steel products produced by Gerdau Ameristeel MRM Special Sections, account for 5.6% of shipments. Flat steels, which account for 13.1% of Gerdau Ameristeel sales, are produced by Gallatin Steel, located in the state of Kentucky (U.S.A.). Gerdau Ameristeel currently has a 50% stake in Gallatin Steel.

Together, the units sold 69.4% more in the region than in 2002, for a total of 5.1 million metric tons.

Gerdau Ameristeel introduced 47 new gauges for the industry sector this year. The plan for 2004 is to expand the product line with 30 additional sizes.

During the year, the North American steel market experienced significant variations in demand levels, industry consolidation and steel sales. All of these variations were the result of exchange rate fluctuations and tariff restrictions on imports. This meant significant challenges for the organization of sales and the management of customer relations. However, at the end of the year, analysts were predicting positive trends for 2004.

Long steel import levels in the United States, home to Gerdau Ameristeel's main operating base, should remain low in relation to recent years due to the higher balance between offer and demand in the international market, the lower purchasing value of the US dollar compared to other currencies and the steep sea freight costs. In 2003, wire rod and rebar imports fell 37% compared to the previous year, when the entrance of 4.3 million metric tons in imports from other countries into the U.S. was recorded. In addition, international market prices are currently higher than those practiced in the United States.

Clear perspectives for improved results were observed in the fourth quarter of 2003. Within this scenario, the expected trend for North America is for a better balance between raw material costs and steel sales, which in turn will positively affect the performance of local steel companies.

Although the price of scrap continued to rise during the beginning of 2004, steel product prices had already been adjusted at higher rates, resulting in margin recovery.

The expected growth of the North American economy due to increased industrial activity, consumption and job creation should result in a GDP growth rate that is greater than the 3.1% rate recorded in 2003.

Canada closed the year with a positive GDP variation of 1.7%, a percentage lower than that of 2002. Performance was affected by the 18.4% increase in the value of the Canadian dollar against the US dollar, a fact that had a negative impact on export results. Economic growth is expected in Canada in 2004.

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