Brazilian steelmaker Gerdau (GGBR4.SA) is reconsidering its plan to build a new steel plant in Mexico, opting instead to potentially increase its production capacity in the United States. The decision comes as U.S. President Donald Trump’s tariffs on steel and aluminum imports reshape global trade dynamics.
Investment Plans Under Review
Last year, Gerdau announced its intention to construct a new special steel mill in Mexico with an annual capacity of approximately 600,000 metric tons, requiring an investment of $500 million to $600 million. A final investment decision was expected by the end of 2024, but this has now been postponed until July 2025.
“We are reviewing all our analyses in light of what is happening,” CEO Gustavo Werneck said during an earnings call. “Special steel is a very important segment for us in the Americas.”
Werneck mentioned the possibility of constructing the Mexican mill in two stages or boosting output at Gerdau’s existing U.S. plants in Michigan and Arkansas.
Impact of U.S. Tariffs on Steel
Earlier this month, President Trump raised tariffs on steel and aluminum imports to a flat 25% with no exceptions. This policy shift impacts major trading partners, including Mexico and Canada.
Gerdau stands to benefit from the tariffs as it operates production units in the U.S., positioning itself as a hedge against protectionist measures. Werneck noted that the tariffs are likely to improve Gerdau’s production mix and profitability in the U.S.
The company is currently operating at 70% of its rolling capacity in the U.S., producing about 4 million tons annually.
Financial Performance and Market Outlook
On Wednesday, Gerdau reported a 9% decline in its fourth-quarter adjusted net profit compared to a year earlier, falling short of market expectations. Despite the profit drop, shares of Gerdau rose by 0.7% on Thursday, in line with the broader Bovespa stock index.
Starting Q1 2025, Gerdau will segment its earnings by regions: Brazil, North America, and South America. Analysts at Scotiabank predict that Gerdau North America will benefit in the near term from the U.S. steel tariffs, though the Brazilian unit may face challenges.
