Gerdau Profile
Gerdau S.A. (Gerdau) engages in the production and commercialization of steel products in general, through its mills located in Argentina, Brazil, Canada, Colombia, the United States, Mexico, Peru, the Dominican Republic and Uruguay.
Gerdau is the leading manufacturer of long steel in North and South America. Gerdau is one of the major global suppliers of special steel for the automotive industry. In Brazil, Gerdau also produces flat steel and iron ore, activities that are expanding Gerdau’s product mix and the competitiveness of its operations. In addition, Gerdau is one of Latin America’s biggest recyclers and, worldwide, transforms millions of tonnes of scrap metal into steel every year, reinforcing its commitment to sustainable development in the regions where it operates.
Gerdau holds significant market share in the steel industries of almost all countries where it operates and was classified by World Steel Association as the world’s 30th largest steel producer based on its consolidated crude steel production in 2021, the most recent year for which information is available.
Gerdau operates steel mills that produce steel in blast furnaces and in electric arc furnaces (EAF). In Brazil it operates three integrated steel mills, including its largest mill, Ouro Branco, located in the state of Minas Gerais. Gerdau has a total of 32 steel producing facilities globally.
As of December 31, 2022, Gerdau’s total consolidated installed annual capacity, excluding investments in joint ventures and associate companies, was approximately 16.7 million tonnes of crude steel and 15.6 million tonnes of rolled steel products.
The company’s product mix includes crude steel (slabs, blooms and billets), which is sold to rolling plants; finished products for the construction industry, such as rebar, wire-rods, structural shapes, hot-rolled coils and heavy plates; finished industrial products, such as commercial rolled-steel bars, light profiles and wires; and agricultural products, such as stakes, smooth wire and barbed-wire. Gerdau also produces special steel items using cutting-edge technology.
The company operates 11 steel production units in the United States, Canada and Mexico; and is one of the leading companies in North America in the production of certain long steel products, such as rebar, wire rod, bars and beams.
The company’s operating strategy is based on the acquisition and construction of steel mills located near its clients and the sources of the raw materials needed make steel, such as scrap steel, pig iron and iron ore. Therefore, historically, most of production has been directed to supply the local markets of the regions where the company operates. However, the company also exports an excess portion of its production to other countries.
Through its subsidiaries and associate companies, the company also engages in other activities related to the production and sale of steel products, including reforestation projects; electric power generation projects; production of iron ore and pig iron, as well as fab shops and downstream operations.
Operations
The company sells its products to a diversified list of customers for use in the construction, manufacturing and agricultural industries. Shipments by the company’s Brazilian operations include both domestic and export sales. Most of the shipments by the company’s business segments in North and Latin America (except Brazil) are aimed at their respective local markets.
The company manages its Business Segments as follows:
Brazil Business Segment - includes operations in Brazil (excluding Special Steel) and iron ore operation in Brazil;
North America Business Segment - includes all operations in North America (Canada and United States), except special steel, in addition to joint venture, located in Mexico;
South America Business Segment - includes all operations in South America (Argentina, Peru and Uruguay), except the operations in Brazil, in addition to the joint ventures in the Dominican Republic and Colombia; and
Special Steel Business Segment - includes the special steel operations in Brazil and the United States, in addition to the joint venture Gerdau Summit Aços Fundidos e Forjados S.A. located in Brazil.
Brazil Business Segment
The Brazil Business Segment minimizes delays by delivering its products directly to customers through outsourced companies under Gerdau’s supervision. Sales trends in both the domestic and export markets are forecasted monthly. The Brazil Business Segment uses a proprietary information system to stay up-to-date on market developments so that it can respond swiftly to fluctuations in demand.
North America Business Segment
The North America Business Segment has annual production capacity of 5.4 million tonnes of crude steel and 4.5 million tonnes of finished steel products. It has a vertically integrated network of 8 steel units, scrap recycling facilities and downstream operations. North America Business Segment’s products are generally sold to steel service centers, steel fabricators or directly to original equipment manufacturers for use in a variety of industries, including construction, automotive, mining, cellular and electrical transmission, metal construction fabrication and equipment fabrication. Most of the raw material feed stock for the mini mill operations is recycled steel scrap.
The mills of this business operation manufacture and commercialize a wide range of steel products, including steel reinforcement bars (rebar), merchant bars, structural shapes, beams and special sections. Some of these products are used by the downstream units to make products with a higher value-add, which consists of railroad spikes, super light beam processing, elevator guide rails and grinding balls.
Sales of finished products to the U.S. and Canadian customers are centrally managed by sales office in Tampa, Florida. There is also a sales office in Selkirk, Manitoba for managing sales of special sections and one in Midlothian, Texas for managing sales of structural and merchant bar products. Metallurgical service representatives at the mills provide technical support to the sales group. Sales of the super light beam products are managed by sales representatives located at their respective facilities. Elevator guide rails are generally sold through a bidding process in which employees at Gerdau’s facilities work closely with customers to tailor product requirements, shipping schedules and prices.
South America Business Segment
The South America Business Segment comprises five steel facilities, retail facilities, fab shops (including joint ventures and associate companies) and scrap processing facilities. The entire operation is focused on the respective domestic markets of each country, operating mini mills facilities with annual manufacturing capacity of 890 thousand tonnes of crude steel and 903 thousand tonnes of finished steel products. The countries in the South America Business Segment are Argentina, Peru, and Uruguay. Gerdau also operates in the markets of Colombia and Dominican Republic through joint ventures.
Special Steel Business Segment
The Special Steel Business Segment consists of the operations in Brazil (Charqueadas, Pindamonhangaba and Mogi das Cruzes) and the United States (Forth Smith and Monroe). The segment produces special steels for engineering steel, tool steel and forged bars. To meet the needs of more demanding markets, this segment is constantly developing new products, such as high-resistance steels, clean steel, high temper steel, good machinability steel, among others.
In Brazil, Gerdau special steel units are located in the states of Rio Grande do Sul (Charqueadas) and São Paulo (Pindamonhangaba and Mogi das Cruzes). The special steel units in Brazil have aggregate annual production capacity of 1.4 million tonnes of crude steel and 1.8 million tonnes of rolled steel. The operation has over 200 clients that are located primarily in Brazil. However, it also exports products, primarily to South America, North America and Europe.
In North America, the Special Steel Segment is present in the United States, with three units located in Monroe (Michigan) and Forth Smith (Arkansas). The company also operates a downstream unit in Huntington (Indiana). The segment has annual installed production capacity of 1.1 million tonnes of crude steel and 1.1 million tonnes of rolled steel products, with a portfolio of more than 200 clients located mainly in the United States, Canada and Mexico.
Products
The company supplies its customers with a wide range of products, including steel products and iron ore:
Semi-finished Products (Billets, Blooms and Slabs)
The semi-finished products (billets, blooms and slabs) have relatively low added value compared to other steel products. Billets are bars from square sections of long steel that serve as inputs to produce wire rod, rebars and merchant bars. They represent an important part of the products from the Ouro Branco mill. Blooms are used to manufacture products, such as springs, forged parts, heavy structural shapes and seamless tubes. Slabs are used in the steel industry for the rolling of a broad range of flat rolled products, and mainly used to produce hot and cold rolled coils, heavy slabs, profiles and heavy plates.
The semi-finished products are produced using continuous casting and, in the case of blooms and billets there is subsequent rolling process.
Common Long Rolled Products
Common long rolled products represent a major portion of the company’s production. The company’s main long rolled products include rebars, wire rods, merchant bars, light shapes and profiles, which are used mainly by the construction and manufacturing industries.
Drawn Products
Drawn products include barbed and barbless fence wire, galvanized wire, fences, concrete reinforcing wire mesh, nails and clamps. These products are not exported and are usually sold to the manufacturing, construction and agricultural industries.
Special Steel Products
Special steel requires advanced manufacturing processes because they have specific physical and metallurgical characteristics for applications with high mechanical demands. This steel is a key product for the automotive industry, as it is used in auto parts, light and heavy vehicles and agricultural machinery. Special steels also serve other significant markets, such as oil and gas, wind energy, machinery and equipment, mining and rail, among others.
Flat Products
The Ouro Branco unit produces cast slabs, which are rolled into flat products, such as hot-rolled steel coils and heavy plates. Gerdau also produces hot-rolled coils, which are sold in the domestic market, and heavy plates, which are sold in the domestic and export markets. The company, through its distribution channel and direct sales, distributes these hot-rolled coils and heavy plates and resells flat steel products manufactured by other Brazilian steel products, which adds more value through additional processing at flat steel service centers.
Iron Ore
Gerdau has three mines producing iron ore, all located in the Brazilian state of Minas Gerais (Várzea do Lopes and Miguel Burnier). The mines produce the following: sinter feed (featuring low content of contaminants and good metallurgical properties, enabling its use as a base material); pellet feed/concentrated (superior quality enabling its use as a chemical balancer in the synthetizing process, while being also adequate for pelletizing, blast furnace quality - low loss by calcination — PPC); hematite fines (small scale production, used as input in Gerdau’s furnaces); and granulated (high quality, used chiefly for own consumption at the Ouro Branco Mill).
Logistics
Gerdau sells its products through independent distributors, direct sales from the mills and its retail network.
Gerdau uses a variety of ports to deliver products from the entire Brazilian coastline. Most exports are shipped from the Praia Mole Private Steel Terminal in Vitoria, Espírito Santo.
Overseas, Gerdau owns a private port terminal in Chimbote (Peru), where the company has a steel mill, used to deliver inputs, raw material and products for the operation.
Competition
The company’s principal competitors include Commercial Metals Company (CMC), Nucor Corporation, Steel Dynamics Inc. and Cleveland-Cliffs.
Seasonality
In Gerdau’s Brazilian and South American operations, shipments in the second and third quarters of the year (year ended December 2022) tend to be stronger than in the first and fourth quarters, given the reduction in construction activity. In Gerdau’s North American operations, demand is influenced by winter conditions, when the consumption of electricity and other energy sources (i.e., natural gas) for heating increases.
Government Regulation
Gerdau’s mining operations in Brazil are subject to the rules of the Brazilian Mining Code and its regulation (Decree-Law 227, of February 28, 1967 and Decree 9,406, of June 12, 2018) and to the applicable mining legislation, with mining exploration governed by Mining Property Rights and Concessions.
The company’s mining exploration activities are subject to the conditions and limitations imposed by the Federal Constitution of Brazil, the Brazilian Mining Code and related laws and regulations, which include requirements connected to, among other factors, how mineral deposits are used, occupational safety and health, environmental protection and restoration, pollution prevention and the health and safety of the local communities where the mines are located.
Gerdau holds environmental licenses for commercial operation of the mines located in the cities of Miguel Burnier and Várzea do in the Brazilian state of Minas Gerais. The mining rights held by Gerdau cover 8,837.19 hectares, and the concessions are valid until the mining deposits are exhausted, provided the legal requirements are fulfilled annually.
History
Gerdau S.A. was founded in 1901. The company was incorporated in 1961 under the laws of Brazil.
