With more than 210 million people, huge infrastructure requirements and an economy getting a shot in the arm from a root-and-branch overhaul of the tax system, Brazil represents a massive opportunity for ArcelorMittal.

Since first arriving in 2006, ArcelorMittal has built a formidable business that now employs 20,000 people and accounts for 42 per cent of the steel market in Latin America’s biggest and most important economy. Serving a wide range of industrial and consumer markets, from automobiles and household goods to construction, energy, shipbuilding and agriculture, it has capacity to produce 15.5 million tonnes of steel a year, as well as 5.1 million tonnes of iron ore, the metal’s principal ingredient.

The business is also growing fast. In the last four years, revenue has more than doubled, from 32.4 billion reais in 2019 to 69.8 billion reais in 2023. Ebitda grew by a similar amount, from 4 billion reais in 2019 to 9.2 billion last year.

That performance is even more impressive when set against the frustratingly sluggish macroeconomic backdrop. Despite Brazil’s huge potential as a leading emerging market, over the last decade annual economic growth has averaged less than 1 per cent, according to the International Monetary Fund (IMF).

For the steel sector, that has translated into annual demand that has remained static for years at around 110kg per person, less than half the average global per capita consumption.

There are several reasons, however, for optimism for the steel sector.

First is the macroeconomic outlook. For the rest of this decade, the IMF reckons Brazilian annual growth rates will at least double as households and businesses start to see the benefits of reforms rolled out by President Luiz Inacio Lula da Silva to simplify the tax system.

Second are the gradually improving monetary conditions. Although overall government debt remains high at more than 85 per cent of GDP, falling inflation means borrowing costs should soon dip below the psychologically important 10 per cent, making it cheaper and easier for families and corporations to finance big-ticket purchases and investments.

And third, a decade of subdued economic activity and low public and private sector investment has created a huge backlog of demand for infrastructure. As well as the need for more ports, airports, roads and bridges under the banner of Lula’s ambitious sustainable and inclusive growth plans, Brazil faces a shortage of 7 million houses.

Combined with the additional consumer demand, that points to massive appetite for steel. Brazil’s National Steel Institute reckons production will rise by nearly 50 per cent to 44 million tonnes by 2050.

“Brazil is really coming back, which is great for the entire sector,” said Jefferson De Paula, CEO of ArcelorMittal Brazil Long Products. “But it’s even better for us. We have the largest market share, we have the biggest range of products and we have the widest distribution network.”

“We’re already very well positioned compared to our peers,” added Jorge Oliveira, CEO of ArcelorMittal Brazil Flat Products. “We have a $100 advantage on an EBITDA per tonne basis thanks to the quality and efficiency of our operations, but what excites me the most are the opportunities ahead of us. We have excess slab capacity which provides us with options, and we’re working on several projects to strengthen our ability to produce higher-added value products.”

Integrated…and growing

Brazil also has some natural advantages up its sleeve.

As a significant iron ore producer, ArcelorMittal has access to abundant raw material supplies. The 3.5 million tonnes of iron ore that ArcelorMittal Brazil unearths each year feed directly into dedicated steel plants located nearby. Indeed, ArcelorMittal Brazil lays claim to having the first integrated steel plant in Latin America.

“Our growth projects focus on both the steel and mining sides of our business,” explained De Paula. “We have four major projects underway, three of which we’ll complete this year, with the last one – in Monlevade – finishing in 2026. Our mining project in Serra Azul will see the construction of a new pellet feed plant that will increase our annual capacity by almost three million tonnes, while our steel projects in Vega, Barra Mansa and Monlevade are all primarily downstream focussed and will give us the ability to produce more technically advanced, higher-margin products.”

“All in, we’ll be investing $1.8 billion, and expect these projects to deliver $0.5 billion additional annual Ebitda,” added Oliveira. “But our growth isn’t just organic. Last year we bought the Pecém plant, a three million tonne slab producer that we’ve been really pleased with. It’s low-cost, high-quality and comes with lots of options – there is land for potential expansion and there’s a lot of work underway to transform the area into a green hydrogen hub.”

Growing responsibly

Brazil is also well positioned to become a major producer of lower-carbon steel. Steel from ArcelorMittal Brazil’s operations is already below the group average for CO₂ intensity, with just 1.72 tonnes of carbon emitted for every tonne of steel produced.

This is due in part to the high levels of energy efficiency across its industrial plants. But it is also testament to the significant proportion of renewable energy in Brazil’s electricity grid, a reflection of the major investment made in wind and solar power that are designed to halve CO₂ emissions by 2030, relative to 2005 levels. That national target – an important way-marker on the road to net zero by 2050 – is well within reach – by 2019, greenhouse gas emissions were already down by a third.

“We’re lucky, Brazil is perfect for renewable energy generation, a long coastline for offshore wind and plenty of sunshine – renewables are very promising here. We can tap into that, directly from the grid, but also by developing our own projects. We’ve formed a JV to develop a 554MW wind power project that will provide 40 per cent of ArcelorMittal Brazil’s total electricity needs,” said De Paula.

The carbon intensity of ArcelorMittal Brazil’s steel also reflects its pioneering use of charcoal – made from sustainable planted eucalyptus forests – as a substitute for mineral coal in the steel-making process.

“People talk about sustainable biomass being one potential solution for decarbonising steelmaking in the future, but we’ve already been doing it for years,” said De Paula.

Its approach to climate action is an integral part of ArcelorMittal Brazil’s broader sustainable development strategy. It was the first steel producer in the Americas to receive ResponsibleSteel™ certification, with three sites – Tubarao, Monlevade and Vega – certified to date and plans to have every single site certified by 2025, and it has long been a leader in the wider group in terms of workplace safety performance.

“The bottom line is that our main asset is our people,” said Oliveira. “We’ve worked very hard to create a culture where health and safety is a true value, where our people genuinely care for one another and where safety comes first in everything they do. We need to make sure all our staff get home every evening safe and sound. We work very hard to make sure that happens every single day – nothing is more important.”