In 2005, the world steel industry maintained the excellent performance recorded during
the previous year. According to the International Iron and Steel Institute (IISI), global steel
production was up 6.1% to 1.1 billion metric tons. The growth in production levels continues to
reflect the growth in international demand, led by the expansion of the Chinese economy.
The Gerdau Group’s sales performance is a result of this positive scenario and of its efforts
to gain new markets in the areas where it operates. A total of 13.6 million metric tons of steel
products were sold in 2005, up 7.9% on 2004.
The Group also continued investing to obtain maximum industrial process operational
efficiency in its units, with the aim of offering its customers outstanding product quality.
In 2005, a total of 13.7 million metric tons of slabs, blooms and billets was produced, up
1.7% on the previous year. Rolled product output was 10.8 million metric tons, 5.2% higher
than in 2004.
In all countries where it operates, the
Gerdau Group works to add value to its
products and to its customers’ businesses,
using downstream operations and rebar
fabricating facilities, the latter being an
increasingly important aspect of the steel
sector. For the markets serviced, this
work signifies greater productivity and
reduced waste.
BRAZIL
The year 2005 was characterized by an austere economic policy, with interest rates reaching
19.75% and ending the year at 18.5%. Inflation, at 5.7%, was similar to the previous year.
Annual GDP grew 2.3%. In this context, the domestic demand for steel products contracted,
but was partially compensated by exports.
Gerdau Group’s Brazilian plants sold 6.3 million metric tons, of which 3.5 million metric tons
went to the domestic market, down 9.6% on 2004. Exports, on the other hand, were up 2.6%,
to 2.8 million metric tons, generating US$ 1.2 billion in sales revenues.
In an effort to increase product value, the Gerdau Group strengthened its activities in
rebar fabricating facilities for civil construction, by expanding its existing Brazilian units.
The Company currently has 25 such facilities, compared to 20 in 2004. By the end of 2006,
the Group intends to open three additional rebar fabricating facilities. Fabricated rebar
increases productivity and reduces losses at construction sites.
In relation to its specific markets, Gerdau has three main competitive advantages: complete
national coverage in Brazil, its guarantee of fast, on time delivery and its wide product
range. It also seeks to be known for the quality of the products and services it offers to
customers (see box: Closer than Ever to Customers). The aim is to meet the specific needs of
each customer, from fabrication to delivery, through the intensive effort of optimizing and
simplifying our sales processes.
An important sales channel in Brazil is Comercial Gerdau, which distributes a complete line of
long steel products made by Gerdau and flat products from other steelmakers. Through its
68 stores, the Company is able to service even the most remote regions of the country.
The Company offers a range of products for civil construction, including rebar, structural
profiles, welded wire mesh and truss frames. In 2005, Gerdau was part of important projects
in the energy sector, supplying steel for the Irapé hydroelectric plant (state of Minas Gerais)
and for wind farms in Rio do Fogo (Rio Grande do Norte) and Osório (Rio Grande do Sul).
Gerdau steel was also used in five Petrobras oil platforms, the Salvador Shopping Mall (Bahia),
the University of São Paulo and the São Paulo subway (São Paulo), among other projects.
The combined use of Gerdau products and civil construction services has brought significant
productivity gains to projects of national significance. For the bridge at Redinha (state of Rio
Grande do Norte), for example, the use of truss frames and mesh delivered to the building
site ready for use resulted in direct savings of 10% in comparison with conventional solutions,
in addition to significant time savings.
In the industrial sector, sales of specialty
steel products grew as a result of the
expansion of the automotive market, with
demand being met in full by the Gerdau
Group. Gerdau Aços Especiais Piratini, the
Group’s mill dedicated to this sector, holds
ISO TS 16949 certification, granted to
organizations that meet global automotive
industry quality system standards.
Forecasts for 2006 indicate that Brazil’s
economy will grow at around 3.5%, which
should have a positive impact on steel
consumption.
ARGENTINA, CHILE, COLOMBIA AND URUGUAY
In 2005, the operations in Argentina, Chile, Colombia and Uruguay sold 801,800 metric tons,
up 54.1% on the previous year. This growth reflects the expansion of the region’s economy,
together with the consolidation of Diaco and Sidelpa (Colombia) and Sipar (Argentina) as
of the fourth quarter. These units supply steel mainly to the domestic markets of their
respective countries: civil construction, industry and agriculture.
Argentina’s GDP grew 9.2% in 2005, driven by growth in civil construction, agriculture, financial
services, transport and communications. The strong revitalization of both public and private
projects in the country’s interior also resulted in greater consumption of steel produced by
Sipar, located in the province of Santa Fé. This year, the Timbúes grain port and the Corredor
del Oeste highway were highlights. The growth in the demand for steel was also significant in
the industrial sector.
For 2006, the market predicts a slowdown in economic growth, which remains, however, at a
significant level of around 7%, favoring Sipar sales.
In Uruguay, economic growth reached 6%, with positive effects on product sales. The positive
scenario for civil construction was fundamental to the performance of Gerdau Laisa. In
2005, the unit became the first Uruguayan company to receive the Ibero-American Quality
Award, a management practices benchmark. Expectations for 2006 suggest a growth of
approximately 4% in GDP.
In the same period, Gerdau AZA (Chile) showed positive performance, driven by the
country’s 6.3% growth in GDP. Investment in the country’s housing sector grew 8.7%,
chiefly as a result of low interest rates, while the infrastructure sector experienced an
11.6% growth in investment, driven by public and private works in areas such as mining.
Gerdau AZA steel was also used in the construction of shopping centers in Santiago,
Antofagasta and Puerto Montt. For 2006, Chile is expected to see a 5.5% growth in GDP,
according to international organizations.
In Colombia, GDP grew by 5.1% and steel sales were driven chiefly by the civil construction
sector, which rose around 23% in 2005. This expansion took place basically as a result
of investments in housing, commercial centers and infrastructure. Supply of fabricated
rebar, previously concentrated in the capital, spread to the countryside. Significant growth
of 12% in the industrial sector was driven by the market for transmission networks and
general metalwork.
CANADA AND THE UNITED STATES
In 2005, the Canadian economy grew 2.9% and the US economy grew 3.5% in comparison
with the previous year, resulting in improved employment levels in the region. During the same
period, Gerdau Ameristeel sales grew 18.7%, totaling 6.4 million metric tons, as a result of
continued demand and the consolidation of North Star facilities.
In relation to the market, Gerdau Ameristeel’s incorporation of new facilities meant increased
supply of products and broader geographic coverage. The challenge, therefore, was to build loyalty
among former North Star customers through intense work with the new customer base.
Furthermore, Gerdau Ameristeel made great efforts to reduce costs, which were impacted
by the increased price of oil and by the hurricanes in the United States. In North America,
cost control efforts are fundamental to maintaining competitiveness, due to the significant
volume of steel imports.
Civil construction, Gerdau Ameristeel’s main market, remained active during the period, with
special emphasis on residential construction projects, schools, hotels and hospitals, primarily
in the Southeastern region of the United States.
The industry is also experiencing a positive phase, which has generated increased demand
for steel products, especially bars and profiles, specialty steel and special sections (see
box: Gerdau Steel in the World’s Tallest Buildings). On the other hand the wire rod segment,
where imports accounted for nearly 50% of the volume sold, presented low profitability
during the period.
The expectation for the market in 2006 is that GDP growth will remain at levels similar
to those recorded during 2005, which should drive steel consumption up.
The Group also continued investing to obtain maximum industrial process operational
efficiency in its units, with the aim of offering its customers outstanding product quality.
In 2005, a total of 13.7 million metric tons of slabs, blooms and billets was produced, up
1.7% on the previous year. Rolled product output was 10.8 million metric tons, 5.2% higher
than in 2004.
The combined use of Gerdau products and civil construction services has brought significant
productivity gains to projects of national significance. For the bridge at Redinha (state of Rio
Grande do Norte), for example, the use of truss frames and mesh delivered to the building
site ready for use resulted in direct savings of 10% in comparison with conventional solutions,
in addition to significant time savings.
