Companhia Siderurgica Nacional Earnings Call Insights: Potential Price Increase, Iron Ore Shipments

On Friday, Companhia Siderurgica Nacional ADR (NYSE:SID) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Potential Price Increase

Karel Luketic – Merrill Lynch: I have two questions, the first one is to Martinez. You provided a positive outlook for the steel market in the coming markets and mentioned a potential price increase of 5% to 10% in the Portuguese call. I was wondering you could provide, if you have any timing – an idea of timing for this potential price increase, what will be the eventual trigger for this to happen? And my second is regarding general growth. you recently provided an updated on that on the last quarter call. I just want to know which are the next steps in the mining development and if you have an updated CapEx for NAMISA? Those are my questions.

Luis Fernando Barbosa Martinez – Executive Officer: This is Martinez speaking. Just to summarize very quickly what we are going to do here in Brazil regarding how to increase our margins. We have basically two equations. First of all is to reduce costs and also we have to improve our pricing in Brazil. In terms of cost of raw materials, as I mentioned during this morning, we are going to have a better cost in terms of ingot price, so we are going to have something like R$493 per metric ton against R$554 the first quarter, so it’s very positive and we believe that we are going to reduce something like 6% for now on to the end of this year. In terms of imports, another (bear) scenario for you. 2010, 4 million a year; 2011, 2 million and we are forecasting to have by the end of this year something very close to 1 million tonnes of imports. So for CSN it’s much more important because we have something like 40,000 to 50,000 metric tons to be recovered in terms of coated products. So it could be interesting for us in order to increase the price here in Brazil. In terms of exchange, exchange rates, it’s also favorable for us, 1.9 to 1.95, could keep all the economy in another level. In terms of premium, premium over imported line in Brazil, currently we have in hot-rolled coils a slightly negative. In terms of cold-rolled it’s slightly positive, and for hot-dip galvanized products the premium is something like 5% to 7%. So, we are expecting, as I mentioned, take into consideration all these variables, and also the competition in the local markets, we are considering to recover the price by the end of this quarter in a range of 5% to 7%.

David Moise Salama – Executive Officer, IR: Now (Daniel Santos) our Mining Director is going to answer your second question.

Daniel dos Santos – Mining Director: Regarding the total CapEx fund, I am either considering 100% NAMISA. We have R$8.4 billion and we gave the same position represent in the last call. That’s 100% NAMISA.

Iron Ore Shipments

Carlos De Alba – Morgan Stanley: Could you also talk a little bit about how your iron ore shipments moved in March and early second quarter. Have you been able to speed up the production at the mine and also the shipments at the port after the rains? Second, you can give us a very quick update as to how you are seeing your production ramp up this year and shipment ramp up this year and next year?

Luis Fernando Barbosa Martinez – Executive Officer: Okay, Carlos. Regarding the performance this year, in the first quarter we are severally affected by the rains as our peers as well in the region. We implemented the necessary actions to recover our production and some extra actions to supplement part of the production in order to recover losses that you have in the first quarter. We will see the result of these actions after this rainy season in our results in this month. We started the month of May very well, we are recovering our performance, and we are confident that we will deliver the expected production to the end of the year. Regarding the ramp-up; the shipment, we skipped our estimate, and we are pushing very hard to deliver the capacity at the port of 45 million tonnes during the end of the this year. So, we start up the utilization of this capacity in the beginning of next year. Our delivery at the port last year was 30 million tonnes in round numbers. We already have 32 million tonnes of capacity and we have all the conditions to deliver 45 in the last quarter of this year.