Brazilian steel company Gerdau SA, the region's biggest steelmaker and the 13th largest in the world, has announced plans to invest $1.4 billion in its Peruvian subsidiary in an effort to transform Peru into a regional steel powerhouse that can profit from Brazil's own building boom.
The investment will boost yearly production at Gerdau's Siderperu unit more than six-fold to 3 million metric tons by 2013, enabling it to increase exports across Latin America and ultimately to Asia, Gerdau CEO Andre Gerdau Johannpeter said yesterday. Initially, output would be increased to 1.5 million tonnes by 2011.
''Peru will be one of South America's three-largest steel producers,'' Johannpeter told reporters after meeting with Peruvian President Alan Garcia in Lima. ''Siderperu will export to Chile and Colombia, and later to Asia and the rest of Latin America.''
"These 3 million tonnes will be sufficient to supply the local market of Peru, which today imports about 50 per cent of its steel," he added.
Garcia is seeking to attract more foreign investments to the country in exchange for allowing companies such as Porto Alegre, Brazil-based Gerdau to ship to Asian buyers through Peruvian ports. Brazilian companies Petroleo Brasileiro SA, Braskem SA and Centrais Eletricas Brasileiras SA are studying investments in Peru, and Odebrecht SA is building an $800 million highway between the two countries.
Gerdau acquired an 83-per cent stake in Siderperu for $203 million in 2006. The unit now produces 450,000 metric tons of steel annually at its main complex in the coastal fishing town of Chimbote - about 17 per cent of Gerdau's yearly output.
The additional steel exports could eventually help close Peru's trade deficit with Brazil, said Jorge d'Escragnolle Taunay, Brazil's ambassador in Lima. Trade between the neighbouring nations reached $2.2 billion last year, he said.
Gerdau - which started as a nail company in 1901 and now operates in 10 Latin American countries as well as India, Spain, Canada and the US - has already pledged $122 million to improve environmental standards at the Siderperu plant. Siderperu's workforce is expected to double to 4,250, and 4,000 temporary construction jobs will be created as well.
Gerdau, one of the largest producers of long-rolled steel in the Americas, has been investing heavily in recent years to boost capacity by expanding its plants and acquiring smaller rivals. Besides Peru, Gerdau also has affiliates in the US, Canada, Argentina, Chile, Colombia, the Dominican Republic, Guatemala, Mexico, Spain, Uruguay and Venezuela.
Gerdau shares rose 0.7 per cent to 30.55 reals ($19.09) in Monday afternoon trading on Brazil's Bovespa exchange in Sao Paulo. The company's US-traded shares were not moving in New York, where markets were closed for the US Labor Day holiday.
The world's No.1 steelmaker ArcelorMittal has made several major investments in the region in recent months:
See: ArcelorMittal buys 70 per cent in Brazilian steel processor Manchester Tubos / ArcelorMittal to spend $760 million on Mexican and American projects / ArcelorMittal takes 49 per cent in Brazilian miner / ArcelorMittal announces major investments in Brazil