How a boutique Brazilian company is leading a ‘green steel’ revolution
Silvia Carvalho Nascimento was on her way to Morgan Stanley’s offices in Miami when she got the call from her father, Dr Ricardo Nascimento. A key employee at the Brazilian metals producer he founded, Grupo Ferroeste, had died suddenly of a heart attack, and her father now urgently wanted Silvia to come and work with him for six months while the company looked for someone else. She was in the middle of her finance training and had planned to build a career outside Brazil, but she figured this would just be a short period of time. Plus, it was a family matter, so she agreed without hesitation. It was a decision that would change her life.
‘I came here in May 2000 and never went back,’ she says with a smile. ‘To be honest, I fell in love with the business. I’ve been doing this for 22 years now and every day is different. I started in the sales department. Nowadays, I’m directing a company.’
That company is Aço Verde do Brasil (AVB), a subsidiary of Grupo Ferroeste that since 2008 has been quietly forging a sustainable revolution in the steel industry. With a climate-focused business model that is rare for the sector, AVB uses a green alternative to coking coal plus renewable energy and circular use of raw materials to create low carbon impact products for its clients in real estate and infrastructure. In 2020 it became the first ever carbon-neutral steel producer, certified by SGS. By 2023 it plans to run the world’s first zero waste steel mill.
Steel can be a tough sell. As commodities go, it lacks the headline-grabbing quality of oil or the glamour of gold, while the basics of production have remained largely unchanged for decades. But Silvia’s passion for the business is infectious, particularly when it comes to the humble eucalyptus plant that is at the centre of AVB’s sustainable offering. The plant takes around seven years to grow, during which time it absorbs more carbon from the atmosphere than it emits when it is burned during the steel-making process. ‘This means it is classified as a zero emission raw material,’ she explains.
This is a major difference from the way steel is normally made. ‘Ninety-five percent of steel in the world is produced in the conventional way involving coking coal and iron ore. That’s a very CO2-intensive process,’ she explains. ‘Brazil is the only place in the world where you have steel being produced using charcoal made from eucalyptus.
The choice of using eucalyptus charcoal was initially made because it felt like the ‘natural route’ given the resources available locally. ‘We’re located up north in the most remote area of Brazil. So what do you have? Lots of land to plant. Great weather. Lots of water. If you live on the beach, you eat more seafood because it’s easier and cheaper,’ Silvia explains. ‘It was the same with charcoal. Now, almost 15 years later, we realise that was the best choice we could ever have made.’
Not only is there no coal used in the process, AVB’s plants use no fossil fuels at all. Instead, they get renewable energy by capturing the process gas from their own furnaces. The company also works to reuse all residuals, from slag to gases. It’s a unique, high-value approach that makes the company stand out for all the right reasons. ‘Commodities are not like a dress,’ Silvia explains, ‘where there is this design or this colour. No, a commodity is a commodity. So you have to find a way to encourage people to buy it from you. We believe that our differential is going to be on our CO2 emission balance sheet.’
It also helps to cut costs for raw materials at a time when commodity prices are surging: ‘What’s good for the environment is also good for me because you consume less to produce the same steel. We have lots of projects going in this direction.’
The company has come a long way from the much simpler business her father founded in 1966 producing pig iron for other steel producers. ‘It was a dream to move forward, to go from making a raw material to producing steel products – wire rods, rebar and so on for the domestic market.’ She says it took almost USD600m of family money to do it but that every penny was worth it: ‘It was the obvious next step to add value to the product.’
This inevitably means a transition away from the tightknit family business structure that has propelled AVB this far. As part of the IPO preparation work, the company must meet certain ESG criteria. The Environmental part is easy, as is the Social element – AVB has long been investing in training, schools and hospitals for its workers in more rural areas. But the Governance aspect is ‘the trickier one,’ she admits. They now have four statutory directors and external board members who are not from the family, but it has involved changing their approach to business slightly.
‘Everything has to go to the board. Everything has to have a specific meeting. That’s less natural for us. If I wanted to make an investment, it’s something that we used to decide on a Sunday at my dad’s house, and on Monday morning, we would do it,’ she says. Such reforms are important not just for improving transparency, but also for making sure that the company is run by the best possible people as the family continues to grow: ‘Going public is a way for us to perpetuate the longevity and the security of the company.’
With international interest in ‘green steel’ picking up and the company growing fast, there’s lots to be excited about. But Silvia is very clear that for her family, it’s not just about the money; it’s also about preserving the legacy of her 80-year-old father for generations to come. That long-term thinking is clear in everything AVB does, from its holistic provision for its workers’ needs to its careful approach to preserving Brazil’s forests.
‘If I want my children and grandchildren to keep growing the company, we have to take care of where we get our raw material from,’ she says. ‘As a family company we have been in the business for 60 years, we want to be in the business for another 60 at least.’