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Profile: Gerdau SA (GGB)

GGB on New York Consolidated

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Gerdau S.A. (Gerdau), incorporated on November 20, 1961, is a manufacturer of long steel in the North and South America. The Company is engaged in the production and commercialization of steel products in general, through its mills located in Argentina, Brazil, Canada, Chile, Colombia, Spain, the United States, Guatemala, India, Mexico, Peru, the Dominican Republic, Uruguay and Venezuela. Its segments are Brazil Operations, which includes operations of steel and iron ore in Brazil, except Special Steels, and the operation of metallurgical coal and coke in Colombia; North America Operations, which includes all operations in North America, except those of Mexico and Special Steels; South America Operations, which includes all operations in South America, except Brazil and the operation of metallurgical coal and coke in Colombia, and Special Steel Operations, including special steel operations in Brazil, Spain, the United States and India.

In Brazil, Gerdau also produces flat steel and iron ore, activities that are expanding Gerdau's product mix and the competitiveness of its operations. Gerdau offers an array of steel products, which can be manufactured according to the customer's specifications. The product mix includes crude steel (slabs, blooms and billets), which is sold to rolling mills, finished products for the construction industry, such as rods, structural bars and hot rolled coils; finished products for consumer goods industry, such as commercial rolled steel bars and machine wire, and products for farming and agriculture, such as poles, smooth wire and barbed wire. Gerdau also produces special steel products, normally with a certain degree of customization for the manufacture of tools and machinery, chains, locks and springs, mainly for the automotive and mechanical industries.

Gerdau operates steel mills that produce steel by direct iron-ore reduction (DRI) in blast furnaces and in electric arc furnaces (EAF). As of December 31, 2016, in Brazil, it operated three integrated steel mills, including its Ouro Branco mill, located in the state of Minas Gerais. As of December 31, 2016, Gerdau had a total of 42 steel producing facilities globally, including joint venture and associate companies. As of December 31, 2016, Gerdau's total consolidated installed annual capacity, excluding investments in jointly controlled entities and associate companies, was approximately 25.5 million tons of crude steel and 22.0 million tons of rolled steel products. As of December 31, 2016, Gerdau operated 17 steel production units in the United States, Canada and Mexico. Through its subsidiaries and affiliates, Gerdau also engages in other activities related to the production and sale of steel products, including reforestation; electric power generation projects; coking coal, iron ore and pig iron production, as well as fab shops and downstream 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 operations in North and Latin America (except Brazil) are focused on their respective local markets. The Company supplies its customers a range of products, including steel products and iron ore semi-finished products (billets, blooms and slabs), common long rolled products, drawn products, special steel products, flat products and iron ore. Billets are bars from square sections of long steel that serve as inputs for the production of wire rod, rebars and merchant bars. 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 range of flat rolled products, and mainly used to produce hot and cold rolled coils, heavy slabs and profiles.

The Company's main long rolled products include rebars, merchant bars and profiles, which are used mainly by the construction and manufacturing industries. Drawn products include barbed and barbless fence wire, galvanized wire, fences, concrete reinforcing wire mesh, nails and clamps. The Company produces special steel used in automotive components, machinery, road and agricultural parts, mining equipment, tools, rail components and maritime mooring at its Pindamonhangaba, Mogi das Cruzes and Charqueadas units in Brazil, at Basauri, Azkoitia and Vitoria units in Spain, at the Fort Smith, Jackson and Monroe units in the United States and in Tadipatri, India. The Company's Ouro Branco mill produces slabs, which are rolled into flat products, such as hot- and cold-rolled steel coils, heavy plates and structural profiles. Gerdau also produces hot-rolled coils, which are sold in the domestic and export markets.

As of December 31, 2016, Gerdau operated three mines producing iron ore, all located in the Brazilian state of Minas Gereais (Varzea do Lopes, Miguel Burnier and Gongo Soco). The mines produce sinter feed (featuring low content of contaminants and good metallurgical properties, enabling its use as a base material); pellet feed/concentrated (enabling its use as a chemical balancer in the synthetizing process, while being also adequate for pelletizing); hematite fines (small scale production, used as input in Gerdau's furnaces), and Granulated (used for own consumption at the Ouro Branco Mill).

Brazil Business Operation

The Company's production sells in Brazil was distributed through Gerdau's distribution channel, with stores throughout Brazil and downstream facilities, serving a number of customers. Its another distribution channel is the independent's network, formed by points of sales to which Gerdau sells its products. Sales through its distribution network and to final industrial and construction consumers are made by Gerdau employees and authorized sales representatives working on commission.

North America Business Operation

As of December 31, 2016, the North America Operation had annual production capacity of 10.9 million tons of crude steel and nine million tons of finished steel products. As of December 31, 2016, it had a vertically integrated network of 17 steel units for the operation of a mini-mill (including joint ventures and associate companies), scrap recycling facilities (including joint ventures and associate companies), downstream operations (including three joint ventures) and fabshops. North America Operation's products are generally sold to steel service centers and steel fabricators or directly to original equipment manufacturers for use in a range of industries, including construction, automotive, mining, cellular and electrical transmission, metal construction fabrication and equipment fabrication. The mills of this business operation manufacture and commercialize a range of steel products, including steel reinforcement bars (rebar), merchant bars, structural shapes, beams, special sections and coiled wire rod. Some of these products are used by the downstream units to make products, which consist of the fabrication of rebar, railroad spikes, cold drawn products, super light beam processing, elevator guide rails, grinding balls, wire mesh and wire drawing.

South America Business Operation

As of December 31, 2016, the South America Business Operation consisted of six steel facilities (including joint ventures and associate companies), retail facilities, fab shops (including joint ventures and associate companies) and scrap processing facilities. As of December 31, 2016, the entire operation focused on the respective domestic markets of each country, operating mini-mills facilities with annual manufacturing capacity of 2.4 million tons of crude steel and 2.4 million tons of finished steel products.

Special Steel Business Operation

The Special Steel Business Operation is composed of the operations in Brazil (Charqueadas, Pindamonhangaba and Mogi das Cruzes), in the United States (Fort Smith, Jackson and Monroe), in Spain (Basauri, Reinosa, Azkoitia and Vitoria) and in India (Tadipatri). This operation produces engineering steel (special bar quality (SBQ)), tool steel, stainless steel, rolling mill rolls, forged and casted engineering pieces. In Brazil, Gerdau special steel operations are located in Rio Grande do Sul (Charqueadas) and in Sao Paulo (Pindamonhangaba e Mogi das Cruzes). As of December 31, 2016, the special steel units in Brazil had a combined annual capacity of 1.4 million tons of crude steel and 1.9 million tons of rolled products. Its products are also exported to South America, North America, Europe and Asia.

The Company competes with ArcelorMittal Brasil, Companhia Siderurgica Nacional (CSN), Commercial Metals Company, Nucor Corporation and Steel Dynamics Inc.

Company Address

Gerdau SA

Av Das Nacoes Unidas 8501 Andar
Pinheiros
SAO PAULO     05.425-070
P: +5511.30946600
F: +5551.33232281

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