International Steel Mills

CSN (Brazil) Loses Lone Blast Furnace, Export Orders in Jeopardy

April 26, 2016

Earlier today CSN began informing their U.S. customers importing flat rolled steel from them that there has been an accident at their #3 blast furnace in Brazil. The blast furnace, which was just coming back into operation after a 10-day scheduled maintenance outage, will now be down for an “undetermined” amount of time.

SMU sources have identified the problem as a “breakout” which is a very serious event. We spoke with one of our CSN sources who advised us that the mill has two furnaces: number 3,which is the one that just went down and number 2 which is a 2 million metric ton a year furnace that is currently idle and it would take up to 90 days to bring the #2 furnace back online. The hope is the mill will be able to repair the #3 furnace in less time. But, it is too early to tell (see photo at left of the breakout of the CSN furnace as published in Odia Rio).

Tulio Perrone, Import Products Manager for CSN, sent a letter to their customers which stated the following:

“On the morning of Monday, April 25th, while bringing Blast Furnace #3 back online after a 10 day scheduled maintenance downturn, an accident occurred causing the furnace to remain offline for a still undetermined timeframe. Although we are happy to inform you there were no injuries or fatalities, our teams are still evaluating the degree of damage and expected downturn, along with effects to our North American order book.

CSN’s Blast Furnace #3 is located in our Usina Presidente Vargas (UPV) mill in Volta Redonda, Brazil. It yields approx. 10,500 MT/day and was CSN’s only presently operating furnace.

We will keep you informed with any new information as it becomes available.”

One of our sources told us CSN does not expect to have firm information available to their customers about the status of their orders until at least sometime next week. The expectation is for force majeure to be declared due to the loss of production.

CSN has become a major exporter of light gauge corrosion resistant steels to the United States over the past year (most being galvanized but also some galvanneal and Galvalume). Preliminary Census data has Brazil (all suppliers) exporting 42,900 net tons of galvanized and 13,400 net tons of Galvalume to the U.S. during the month of March. We understand from one of our sources that CSN Brazil was exporting about 25,000 tons per month to the United States. To put that into perspective the CSN Terre Haute, Indiana mill is able to coat about 24,000 tons per month of galvanized.

U.S. customers are concerned to say the least. We spoke with one large buyer who confirmed they have both Galvalume and galvanized orders on with CSN Brazil. The head of purchasing told us, “As a seasoned buyer this puts one more obstacle in the way. This market is supply constrained and for the life of me I don’t understand why with all the steel in China… There is no place to replace the CSN tons.”

The buyer went on to say, “Our March/April orders are on the water and the next months orders are in production. The months of June and July will be when it really hurts. There is no way I can get the prices that I paid for that material. The difference is $200 to $250 per ton from another foreign source and $340 per ton if I were even able to buy it domestically.”

We checked with CSN Terre Haute, Indiana mill and SMU was told the mill was in July production but the mill is currently not taking orders as they wait for the market to determine where prices will go from here. They thought they would be back in the market sometime next week.