ArcelorMittal (MT) is expected to raise flat steel prices in Brazil by 10% through reducing discounts, the Estado news agency reported Monday.

The information came from Brazil's second-largest independent steel distributor, Frefer.

Brazil's steel distributors account for around 30% of domestic flat steel sales, which are expected to reach 3 million metric tons this year.

ArcelorMittal's move comes after local rivals Companhia Siderurgica Nacional, or CSN (SID), and Usiminas (USIM5.BR) withdrew similar price discounts earlier this month.

According to Frefer's president, Christiano da Cunha Freire, steel distribution has been the target for price increases because it was the sector that cut its prices most during the worst moments of the economic crisis.

Now, it is the first sector to reflect an improvement in the market, he said.

Freire said ArcelorMittal wanted to end discounts to its distribution clients by the end of September.

Last week Finance Minister Guido Mantega said Brazil may cut steel import tariffs to zero if steel prices rise.

Mantega said a 15% tariff on steel imports, reintroduced in June after three years at zero, might be scrapped if prices continued to increase.

Earlier this month, Brazil's steel distribution association, or INDA, said steel prices had risen between 10% and 14% in September.

INDA President Carlos Loureiro said the rise was due to a gradual recovery in domestic steel demand, along with a reduction in discounts given by steel mills to distributors.

The discounts were as much as 35% at the height of the crisis, he said.

Loureiro said he expected inventories in August were likely sufficient for two months' supply, compared to a "normal" level of 2.6 months' supply.

Loureiro forecasted third-quarter steel sales in Brazil would likely rise around 15%, compared with the second quarter.

- By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086; john.kolodiejski@dowjones.com

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