Brazilian automakers plan temporary stoppage to fight coronavirus outbreak: companies

São Paulo — At least 12 Brazilian automakers are set to temporary stop or reduce activities help fight new coronavirus outbreaks in the country, the companies said March 26.

Brazil is in the midst of a sharp uptick in COVID-19 cases, which surpassed 100,000 new cases in one day, while the daily death toll surpassed 3,000 for the first time.

Most of the automakers will halt activities from March 29 to April 4, they told S&P Global Platts.

Moreover, a shortage of auto parts and the decision by authorities to move several 2021 and 2022 municipal holidays forward, have contributed to the decisions.

As expected, such a move has brought further uncertainty to the local metals' markets, with steelmakers signaling additional hikes in steel prices for the first week of April, and end-users wary of higher costs amid a period of increased restrictions and quarantines.

Flat steel spot prices in Brazil have rallied over 70% in 2020 and an additional 29% year to date on the back of reduced supply, low levels of inventories and firm demand.

Mills continue to push for hikes to widen margins and to take advantage of favorable exchange rate and strong international prices.

Brazilian HRC is currently at a discount of 4.2% to the Chinese HRC delivered price at Brazilian ports, after customs clearance, at $950.64/mt, according to S&P Global Platts calculations.

The exchange rate March 26 was Real 5.74/$1.

Renewal of annual contracts with automakers were reported between 45%-55% earlier this year, with some companies yet to agree, sources said.

"This situation ultimately translates into very expensive vehicles sold to the market and lead times more extended than ever," one observer said.

On the raw materials side, ferrous scrap dealers in Brazil are concerned about the impacts of the automakers' stoppages on the generation of industrial scrap grades.

The low generation and supply of industrial and obsolete grades coupled with increased procurement by steelmakers were the reason behind the escalation of scrap prices in 2020.

Industrial grade clean steel scrap jumped 130% last year and at least 23% year to date.

But having supply is the primary concern nowadays, not prices, according to a dealer.

"This impacts the steel chain," the dealer said, fearing a long-continuing volatile market.

Automakers' decisions

VOLKSWAGEN: Will interrupt its activities in the three units (São Bernardo do Campo and Taubaté, in São Paulo state, and São José dos Pinhais, in Paraná state) between March 24 and April 5.

VOLKWAGEN TRUCKS AND BUSES: Production at the Resende plant, Rio de Janeiro, will be interrupted between March 29 and April 4.

NISSAN: Will adopt collective vacations at its factory in Resende, Rio de Janeiro, between March 26 and April 9, resuming on April 12.

RENAULT: Will suspended production at the factory in São José dos Pinhais, Paraná, from March 29 to April 4, resuming on April 5.

HYUNDAI: Will stop production at the Piracicaba plant, in Sao Paulo, from March 29 to April 4 in support of the local measures announced to combat coronavirus.

HONDA: Will stop production lines at the Sumaré and Itirapina units, both in São Paulo, between March 30 and April 9. The resumption is scheduled for April 12.

SCANIA: Will suspend production at the São Bernardo do Campo plant, São Paulo, between March 26 and April 4.

MERCEDES-BENZ: Will suspend operations at the factories in São Bernardo do Campo, São Paulo, and Juiz de Fora, Minas Gerais, between March 26 and April 5.

TOYOTA: The company will follow the recommendation of several city halls and anticipate the holidays between March 26 and April 4, with the return to activities on April 5.

BMW: Factory will be closed between April 1 and 5, resuming on April 6.

GENERAL MOTORS: Gravataí factory, in the southern state of Rio Grande do Sul, stopped due to lack of inputs (semiconductors). Units in Joinville, Santa Catarina state, São Caetano do Sul and São José dos Campos - both in São Paulo - continue to work normally.

VOLVO: The Curitiba plant has been operating with production capacity reduced by 70% since March 23, due to the lack of semiconductors and also to help fight the new advance of the pandemic. The measure, which impacted 2,000 of the 3,700 employees that the company has, is expected to last until the end of March.

GRUPO CAOA: Factory in Jacareí, Sao Paulo, has no plans to suspend its activities.

JAGUAR LAND ROVER: The Itatiaia plant, in Rio de Janeiro, continues to operate normally.

MITSUBISHI: Production at the Catalão plant, in Goiás, remains normal.