UPDATE 1-IABr sees Brazil steel output, sales down as economy slows
(Adds details on the data, comments from IABr president, background throughout)
RIO DE JANEIRO Aug 20 (Reuters) - Brazil's largest steel industry lobbying group on Tuesday cut its estimate for output and sales this year, a sign that mills are grappling with weak domestic demand and the impact of a currency slump on costs.
Mills are unlikely to see raw steel output grow this year, and sales are expected to rise at a slower pace than previously thought, Instituto Aço Brasil said. The group, also known by its acronym of IABr, now expects sales to rise 5.3 percent in 2013, with no expansion of output.
"Local demand really disappointed us. Its performance was worse than we imagined, but we remain hopeful things will get better at some point," Marco Polo de Mello Lopes, president of IABr, said at a news conference in Rio de Janeiro.
The new estimates underpin growing concerns among industry leaders over the government's ambiguous stance on the sector, which has been showing signs of recovery from its worst crisis in years. Previously, IABr had expected increases of 5.8 percent in output and 7.6 percent in sales.
President Dilma Rousseff's administration recently forewent extending tax surcharges on imported steel - a move that the IABr said could hamper local mills. According to the group, the government's argument that a weaker currency could help offset the impact of the end to the surcharges is unlikely to aid the industry and discourage imports.
During 2009 and 2010, steelmakers significantly expanded installed capacity on expectations that Brazil would undertake the largest infrastructure investment plan in its history. But most of that plan failed to materialize.
A slowdown in overall economic activity has deepened the problems of an industry reeling with high raw materials and labor costs and the threat of cheap imports. Most economists have in recent weeks cut their economic growth estimates for this year to somewhere close to 2.1 percent, from about 2.5 percent earlier this year.
IABr sees apparent consumption of steel in Brazil's domestic market, a measure of local output sold locally plus imports, growing 3.2 percent this year, down from a prior estimate of 4.2 percent. Apparent consumption is seen up 3.8 percent next year to 27 million tonnes.
Exports are expected to slump 13 percent this year, compared with a prior estimate of 8.8 percent, the group added.
Shares of steelmakers Gerdau SA, Usinas Siderurgicas de Minas Gerais SA, or Usiminas, and Cia Siderurgica Nacional, or CSN, all fell on Tuesday, reversing two straight sessions of gains. (Reporting by Rodrigo Viga Gaier; Additional reporting by Alberto Alerigi Jr.; Writing by Guillermo Parra-Bernal; Editing by Gerald E. McCormick and Steve Orlofsky)
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