UPDATE 1-Brazil's CSN and rivals to raise steel prices
* ArcelorMittal, CSN told distributors of plans
* CSN announces hikes of up to 7.2 pct for some products
* Analysts expect gradual price increases
By Guillermo Parra-Bernal and Alberto Alerigi
SAO PAULO, Jan 4 (Reuters) - Brazilian flat steelmakers led by Cia Siderúrgica Nacional SA will raise prices as early as this month, sources at steel distributors said on Friday, in a move that may face mild resistance from clients as inventory remains low.
CSN, as the São Paulo-based company is known, announced a 3.5 percent price hike for hot-rolled coil and galvanized products and a 7.2 percent increase in cold-rolled steel products, said the sources, who declined to be identified because they are not authorized to speak to the press.
ArcelorMittal SA, the world's top steelmaker and a large mill in Brazil, upped prices by an average 4.37 percent, two other sources in the distribution segment said. Usinas Siderúrgicas de Minas Gerais SA, Brazil's No. 1 maker of flat steel products, also announced potential price hikes although is yet to implement them.
"Mills are seeking to recoup some of the profit margins that they lost last year. In our case, since we are building up inventory, there's is no way we can fight this increase," a São Paulo-based distributor said.
A CSN spokesman could not immediately be reached by telephone. Usiminas, as Usinas is known, does not comment its pricing policy. E-mails sent to ArcelorMittal representatives in Brazil were not immediately answered.
Steelmakers in Brazil will likely witness a recovery in sales and a reduction in excess capacity next year as recent government measures to revive growth are bearing fruit, Instituto Aço Brasil, the group representing the sector, said in November.
Yet, recent industry data pointed to still-weak demand in December. According to the IABr, as Instituto Aço Brasil is known, flat steel demand was down 2 percent on a month-on-month basis in November, with shipments to distributors tumbling 4 percent in the same period.
Inventory rose slightly to the equivalent of 2.4 months of sales in November, according to Sindisider, the group that represents steel distributors. Yet, analysts estimate that the ratio could rise in December.
News of price increases are seen as encouraging for mills, which have grappled with global steel overcapacity and weak prices, rising costs for some raw materials such as coal, and a domestic output glut over the past three years.
"Although this is a clear positive for flat steel players, we believe the implementation should be gradual," Bank of America Merrill Lynch analysts led by Thiago Lofiego said in a Friday note. "In the short term, potential price hikes ... could create a positive momentum, but we think those are generally priced in."
Preferred shares of Usiminas, the company's most widely traded class of stock, fell 1.5 percent to 13.04 reais on Friday, while those of CSN shed 0.9 percent to 12.69 reais.
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