The Brazilian steel and aluminium sectors are preparing for a period of short electricity supply in the coming months due to a persistent drought in a country heavily reliant on hydroelectric power generation.
A drought has reduced water reservoirs in Brazil, mainly in southeastern and midwestern states, leading to an electricity cost spike and fears of blackouts or even mandatory power rationing that could affect metals supply and demand.
Steelmakers are expected to face few direct impacts from lower energy supply, since most producers generate their own electricity.
"There is always some affect in steel production, but it will be likely a small impact," according to Carlos Loureiro, president of national flat steel distribution association Inda.
"There is a movement to change production to periods where power consumption is lower in the country, but so far we have no signs of any company reducing steel consumption because of the possibility of power rationing," Loureiro added.
Steel output has recovered in the country, balancing supply-demand fundamentals and supporting high domestic prices.
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