According to Brazilian Steel Institute, strong demand from Brazil's civil construction and automotive industries continued to fuel an increase in domestic crude steel production in May 2008.

IBS said that Brazilian steelmakers produced 2.972 million tonnes of crude steel in May up by 2.8% YoY from 2.891 million tonnes in May 2007. Production of rolled steel products advanced 1.2% YoY to 2.216 million tonnes in May 2, compared with 2.189 million tonnes in May 2007. Output of long steel products continued its recent surge, but flat steel production slipped for the third consecutive month in May.

Strong demand from the civil construction industry and a surge in infrastructure projects has fueled demand for long steel products in Brazil. In May, long steel output reached 933,800 tonnes up by 8.1% YoY from 863,500 tonnes in the same month last year.

However, output of flat steel products slid 3.3% in May 2008 despite continued strong performance by the Brazilian auto industry and increased demand from the oil, gas and naval sectors. Flat steel production declined to 1.282 million metric tons in May from 1.326 million tons in the same month a year ago.

Steel production so far in 2008 has continued to build on the record year registered in 2007, when domestic demand surged on a government growth plan and an improving local economic climate. In addition, declines in local interest rates in 2007 expanded access to credit for such steel intensive goods as housing and autos. However, growing inflation concerns could curtail credit use going forward. The Brazilian Central Bank has raised its benchmark Selic base interest rate at its past two meetings to 12.25%.

IBS said that May domestic sales figures continued to rise at a double digit pace, maintaining last year's strong growth. Domestic steel sales climbed 13.0% to a record 2.007 million tonnes, from 1.777 million tonnes in May 2008. May's sales figures topped the previous record of 1.930 million tonne set in April.

It added that sales of high value rolled steel products maintained solid growth in May, while semi finished products posted gains on increased local production capacity. Domestic rolled steel sales jumped 13.0% to 1.939 million tonnes from 1.716 million tonnes in the year ago period.