[Ferro-Alloys.com] Sao Paulo — Brazilian steelmakers Gerdau and CSN attribute their long steel price hikes in the first half of 2018 to higher raw material and domestic freight costs, adding further increases are possible in the second half of the year.

"CSN applied price hikes of as much as 16% for its longs products since the start of the year," CSN commercial director Luis Fernand Martinez said during a conference call with analysts Wednesday, adding that additional hikes were likely during the second half.

"It was margin recovery," Gerdau CEO Gustavo Werneck said during the company's Q2 earnings call, noting in particular raw material costs. The executive did not provide any details on size of the increases introduced by the company so far.

A two-week trucker strike across Brazil in May and the resulting introduction of a minimum freight tariff by the National Land Transport Agency (ANTT) also increased costs and significantly affected inflation, according to the executives.

Martinez said the Brazilian Real's slide against the US dollar was an important variable. "With a foreign exchange rate currently at Real 3.70/$1, the outlook for adjustments is supportive," he said.

The exchange rate was ranging around Real 3.25-Real 3.30/$1 at the beginning of the year.

Werneck echoed that perspective, adding that Brazilian long steel prices have been ranging from "a discount to parity" compared with imports so far this year.

According to S&P Global Platts calculations, Brazilian rebar is currently sold domestically at Real 2,600/mt ($702/mt), about 2.6% below the imported rebar delivered price to Brazilian customers, after customs clearance, of $718/mt.

Historically, a sustainable situation for domestic long steel competing with imports was a 8%-12% premium for the former, according to sources.

The price of ferrous scrap -- the main raw material used in the electric arc furnace steelmaking process -- has also risen since the beginning of the year as a result of a reduction in supplies.

So far in 2018, clean steel scrap grade prices in Brazil jumped 85% from Real 533/mt ($144/mt) delivered in January to Real 990/mt delivered ($267/mt) in August, the highest value since April 2014's $725/mt, according to Platts data.

• [Editor:Jiang Li Juan ]