North America carries a bruised Brazil
- North America is the profit anchor, helped by data centers, renewable energy, and a roughly 90-day order backlog.
- Brazil is the weak spot, with record steel imports in 2025 and melt shop use below 60%.
- The company took about BRL 2 billion of impairment charges tied to underused Brazilian assets.
- Gerdau is cutting back wider growth spending, but keeping the Miguel Burnier mine project for H2 2026.
- The stock screens better on valuation than on clean growth, which fits a cyclical steel story with real risks.
A split steel story
The bull case is simple: North America is carrying Gerdau. Demand from non-residential construction, especially data centers, and renewable energy is helping shipments. Management also points to a roughly 90-day backlog and strong growth in downstream products, which are more finished steel products sold closer to the end customer.
The bear case sits in Brazil. Imported steel hit a new record in 2025, and Gerdau said melt shop use fell below 60%. That matters because steel mills need high use to spread fixed costs. Low use led to about BRL 2 billion of impairment charges on idle or weaker assets.
Two things could change the story. Brazil may still get stronger trade defense on hot-rolled coil, which is flat steel used in industry. Gerdau also expects the Miguel Burnier mining project to ramp in H2 2026, which should lower raw material costs at the Ouro Branco mill.
The open question is whether North America can keep offsetting Brazil. US tariffs rose to 50% in June 2025, which helps protect local US steel but can hurt Brazilian semi-finished exports to the US.
Scrap, mines, and mill use
Gerdau makes money by buying raw materials, melting or rolling steel, and selling steel products into construction, industry, autos, energy, and infrastructure. Its main products are long steels like rebar and merchant bars, flat steels like hot-rolled coil, and special steels.
In North America, a key cost edge is using obsolete scrap instead of prime scrap. Obsolete scrap is older recycled metal, such as material from demolished buildings or old equipment. That can protect Gerdau when prime scrap prices jump.
In Brazil, Gerdau is more integrated. It is investing in captive iron ore through the Miguel Burnier project to support the Ouro Branco mill. It is also investing in energy self-sufficiency, partly to lower costs and capture Brazilian tax benefits.
The weak point is volume. If imports keep taking share in Brazil, Gerdau either runs plants at low use or sells at worse prices. That is why it canceled the planned Mexico investment, reduced global CapEx for 2026 to BRL 4.7 billion, and is focusing on the projects it thinks protect cost.
What Gerdau sells
Long steels
This includes rebar, merchant bars, and structural profiles. Rebar is more exposed to imports in Brazil, so Gerdau is trying to protect share while shifting mix where it can.
Flat steels
Hot-rolled coil is a larger focus after the Ouro Branco expansion opened in March 2025. Better trade defense in Brazil would help this product line.
Special steels
These steels serve more specific uses, including automotive and industrial markets. Demand can swing with vehicle and industrial production.
Downstream products
These are higher value-added products such as thermal treatment and solar piles. Management said the North America downstream line grew 39% year over year into 2025.
Iron ore for internal use
The Miguel Burnier mine is meant to secure raw material for Ouro Branco. If it ramps well in H2 2026, Brazil costs should improve.
North America now leads sales
Segment shares use 2025 net sales from the 2025 Form 20-F. The three reported segments add to slightly more than consolidated sales before eliminations, so the shares shown follow the filing's segment view.
What could break the thesis
Brazil imports stay too high
High impact · High oddsBrazilian steel imports reached a new record in 2025. Gerdau says the quota tariff system has loopholes, so imports can still pressure prices and plant use. If melt shop use stays below 60%, Brazil earnings can remain weak even if demand is not terrible.
Coal costs squeeze Ouro Branco
Medium impact · Medium oddsAbout 20% of the Brazilian cost base tied to Ouro Branco is exposed to coal. Coal costs rose from Q4 2025 to Q1 2026, which can hit margins before the Miguel Burnier mine helps the cost base. This is a near-term risk to Brazil profit.
US tariffs hurt Brazilian exports
Medium impact · Medium oddsUS Section 232 tariffs were raised to 50% in June 2025. That can support US domestic steel pricing, but it also makes Brazilian semi-finished exports to the US harder. This creates a push and pull inside one company.
North America demand cools
High impact · Medium oddsThe current bull case depends on North America staying strong. Data centers and renewable energy are helping, but industrial demand has been softer and merchant prices can fall. If the backlog shrinks, the company loses its main offset to Brazil.
The real weakens against the dollar
Medium impact · Medium oddsSome Brazil costs are tied to the US dollar. A weaker Brazilian real can raise costs and make margin recovery harder. It can help exports, but that may not be enough if local prices stay under pressure.
In one breath
What does Gerdau do?
Gerdau makes steel products used in construction, industry, energy, autos, and infrastructure. Its main products are long steels, flat steels, special steels, and higher value-added downstream products.
Why is North America so important for Gerdau?
North America is currently the strongest segment by sales and earnings support. Demand from data centers, renewable energy, and non-residential construction is helping offset the weaker Brazil business.
What is the Miguel Burnier project?
Miguel Burnier is Gerdau's mining project in Brazil. It is expected to ramp in H2 2026 and should help lower raw material costs for the Ouro Branco mill.
What is the biggest risk for GGB stock?
The biggest risk is that Brazil stays weak for longer because imports keep pressuring prices and plant use. A second risk is that North America cools before Brazil recovers.