By Brazil Stock Guide – Usiminas (B3: USIM5; OTC: USDMY) more than tripled its second-quarter net income and cut the midpoint of its 2026 capital spending plan by R$200 million. The improvement was driven by higher prices, a more profitable product mix and efficiency gains in its steelmaking operations, despite lower sales volumes.
Net income reached R$428 million, up 236% from a year earlier. Adjusted Ebitda rose 86% to R$761 million, while the margin doubled to 12.4% from 6.2%. Net revenue, however, fell 7% to R$6.13 billion.
“The inflow of steel and imported manufactured products continues to put pressure on the utilization of Brazil’s installed industrial capacity,” the company said. According to Usiminas, foreign competition remains intense despite trade-defense measures adopted by the Brazilian government.
Higher Prices Offset Lower Volumes
The steelmaking division accounted for most of the improvement. Adjusted Ebitda at the unit increased 26% from the first quarter to R$688 million, while its margin widened to 13% from 10%.
Higher prices and a more profitable product mix added R$234 million to quarterly Ebitda. That was enough to offset a R$126 million negative impact from production costs and a R$13 million drag from lower sales volumes. Steelmaking net revenue per metric ton rose 5%, while cost per ton increased by about 1.6%.
The result also included R$56.8 million from the recovery of amounts related to a defined-benefit pension plan. Excluding that one-time effect, steelmaking Ebitda would have been close to R$631 million — still about 16% higher than in the first quarter.
Crude steel production increased 10% from the previous quarter to 803,000 metric tons, but sales fell 2% to 989,000 tons. Compared with a year earlier, sales volumes declined 8%, showing that the earnings recovery was driven primarily by pricing, mix and efficiency rather than stronger demand.
Trade Barriers Support Prices, but Volumes Remain Weak
Brazil has introduced tariff-rate quotas to curb the rise in steel imports. Shipments within the government-set quotas are subject to regular import duties, generally ranging from 9% to 16%. Once those limits are exceeded, the tariff rises to 25%.
The government has also imposed antidumping duties on specific products. In February, Brazil introduced definitive measures, valid for up to five years, on imports of Chinese cold-rolled and coated flat steel — products that compete in markets served by Usiminas.
The barriers help narrow the price gap between imported and domestically produced steel, giving Brazilian mills greater room to raise prices. Still, Usiminas said import volumes remain elevated, particularly from Asia.
The company also highlighted the growing pressure from indirect steel imports. Instead of importing steel sheets, Brazilian buyers are purchasing vehicles, auto parts, machinery and equipment manufactured abroad. Because the steel arrives embedded in finished products, trade measures targeting the raw material do not fully protect domestic producers.
Iron-Ore Business Set to Weaken
Iron-ore sales rose 27% from the first quarter to 2.47 million metric tons. Adjusted Ebitda at the mining division, however, fell 36% to R$71 million, while the margin narrowed to 8% from 14% as logistics costs weighed on profitability.
Usiminas said freight rates on the Brazil-to-China route now represent about 33% of the global benchmark iron-ore price, roughly 10 percentage points above the recent historical average.
For the third quarter, the company expects broadly stable operating results in steelmaking, excluding one-time effects, and weaker performance in mining. Usiminas forecasts higher domestic steel sales and price increases for industrial customers, but also expects rising costs for coal, coke and steel slabs.
The company ended June with a net cash position of R$499 million and positive free cash flow of R$35 million. Usiminas also lowered its 2026 capital expenditure forecast to between R$1.2 billion and R$1.4 billion, from a previous range of R$1.4 billion to R$1.6 billion. The revision represents a R$200 million reduction, or about 13%, at the midpoint of the annual plan.
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