Simec remains optimistic about Brazilian steel mill

Almost ten months after debuting in steelmaking in Brazil, Mexicos's Grupo Simec believes it's already attaining a good performance despite the recession, both operationally and commercially, at the Pindamonhanga mill in the Paraíba Valley, São Paulo, built to produce long steel products such as wire rod and rebar.

The mill wants to tap the construction and infrastructure markets. Both are contracting now, with a strong reduction in construction of new homes, commercial and industrial properties, and a dearth of public works.

Jaime Moncada Ramos

“Despite market conditions, we reached June with a good output level around 25,000 tonnes a month of rebar and we expect to reach our target for August,” told Valor Jaime Moncada Ramos, general director of GV do Brasil, as the local unit has been named. The company expected to reach 30,000 tonnes last month.

Grupo Simec, which is controlled by the Vigil family, of Guadalajara, has invested $400 million in the Brazilian venture, started in 2012 and completed in the third quarter of 2015. Currently it operates 11 units in Mexico, six in the US, one in Canada and one in Brazil, the first outside of North America.

The executive says Simec now forecasts monthly output of 35,000 tonnes, considered the break-even point of the operation, by the first year of activity in November. “We're confident because the market is accepting well our product, which brings the GVB-50 brand,” he says.

The company employs 300 workers in two shifts at the melt shop and three shifts at the rolling mill, which processes the bar-shaped output of the former. The company aims to also offer rolled rebar by year-end. “We still seek a little more scale and mastering the mill’s entire technology,” he said.

The project of GV do Brasil includes the production of wire rod for industrial applications such as nails, wires and other products.

The executive says GV do Brasil’s forecasts for output and sales in 2016 have been revised from 180,000 tonnes early in the year to 250,000 tonnes, the equivalent to 60% of the expected production of rebar and bars at the mill. “We already reached almost 110,000 tonnes through the end of July and are running with positive operating profit,” Mr. Ramos added.

Rebar and bars are sold for $480 to $500 per tonne in the local market. The executive says that as the brand becomes better known GV will try to enter more premium markets – distributors and retail. Its wire rod, meanwhile, is aimed at large industrial clients, like manufacturers of special parts such as bodies for box trucks.

This month, the company will open a São Paulo office on Paulista Avenue, where the commercial director and sales agents will be based.

GV competes in Brazil with Gerdau, ArcelorMittal, Votorantim Siderurgia, Cia. Siderúrgica National (CSN ) and Sinobras.

With capacity to produce 500,000 annual tonnes of dowels, the Brazilian subsidiary was initially designed to produce 400,000 tonnes of rebar and bars, and there’s the possibility to increase that volume a little. As for wire rod, the estimated production is of 50,000 tonnes.

The group was founded in 1969 in Jalisco, capital of Guadalajara province. There are five family members, led by Rufino Vigil, who comes to Brazil once a month to visit the GV operations. The control is carried out through companies of the Vigil family, especially Industrias CH, owner of 55.9% of the company’s capital. The group has 14.9% of its shares traded on the Mexican stock market.

In addition to common long steel, Simec also produces special bar quality, with total capacity of 3.82 million tonnes. Production was 2.2 million tonnes in 2014 and 1.66 million tonnes in the first nine months of last year. As for special steel, which accounts for half of its sales — 820,000 tonnes through September 2015 —, it’s among the largest manufacturers in the US with Republic Steel.

In 2014, the group had $ .8 billion in revenue — the consolidated data for 2015 were not disclosed due to balance-sheet adjustments ordered by Mexico’s stock exchange and the Securities and Exchange Commission in the country. Through September 2015, revenues totaled $1.28 billion, with a $40 million profit. Simec’s total debt was $300 million.

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