Dow Jones reported that Brazil's steelmakers will produce and sell less in the domestic market in 2011 than earlier expected as softer economic growth hits demand.

Mr Marco Polo de Mello Lopes executive president of Brazilian Steel Institute IABr said that it has cut its previous estimates for output growth and for demand by 8% and 9% respectively, as various industries have reduced their demand for steel because of higher interest rates. He added that "Continuing intense competition from steel import levels and high inventories are also curbing production growth."

Mr Lopes said that crude steel output in 2011 is now seen growing 10.5% YoY to 36.3 million tonnes, due to the bringing into production of a new steelworks. However, this is lower than the 39.4 million tonnes forecast earlier this year and considerably below the industry's current capacity level of 47.9 million tonnes.

Mr Lopes said that the new steelworks, Companhia Siderurgica do Atlantico SA, a JV between ThyssenKrupp Steel and Brazil's Vale SA produces exclusively for the export market and will boost Brazil's steel exports by 24.8% to 12.22 million tonnes in 2011.

He said that steel consumption in Brazil is meanwhile expected to fall 0.9% YoY in 2011 to 25.87 million tonnes of products, of which 12% will be supplied by imports. In 2010, Brazil's steel consumption of 26.1 million tonnes was supplied 21% by imports.

Imports of steel products may fall to 3.4 million tonnes in 2011, 42.4% below 2010's record levels of 5.9 million tonnes, but are still considerably above Brazil's normal import levels of 2 to 3 million tonnes a year.

Mr Lopes said that "Brazil is no longer a competitive place to produce steel. Local producers are faced with a tax burden, electrical energy prices and labor costs which are higher than in many other steel producing countries, and greater control is still needed on the prices and quality of steel imports."

He said that the Brazil steel sector may request the government to raise steel import tariffs in a move to help protect local investments in the industry from the continuing threat of imports. He added that "We're negotiating. It's an emergency."