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| Armco |
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| Environmental & Social Review Summary |
This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content. |
| Project number | 25956 |
| Country | Brazil |
| Sector | Primary Metals |
| Department | Global Manufacturing & Services |
| Company name | Armco do Brasil S.A. |
| Environmental category | B |
| Status | Pending Approval |
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| Date ESRS disclosed | April 18, 2008 |
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| View Summary of Proposed Investment (SPI), click here |
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| Overview | Category & Applicable Standards | Key Issues & Mitigation | Community Engagements | Client's Documentation |
| Overview of IFC's scope of review |
The environmental and social review consisted of appraising technical, environmental, health and safety and social/community information submitted by ARMCO do Brasil S.A. The appraisal included interviews with the environmental manager and HR manager and a visit to the company’s primary plant in Vila Prudente (edge of Sao Paulo city), where the site visit covered production areas and environment related areas and systems, including effluent treatment stations, solid waste storage areas and fire prevention systems. The project will expand the company’s operations to a brownfield site in Jacareí, where the following Environmental, Health and Safety (EHS) and social community impacts were analyzed:
- Environmental and social assessment of the new facility at Jacareí
- Compliance with IFC’s Performance Standards and Guidelines;
- Compliance with IFC and local Environmental Health and Safety requirements; and
- Social and Communities issues. |
| Project description |
Headquartered in the city of Sao Paulo, Armco do Brasil S.A (Armco or the company) is a mid-sized manufacturer of steel products, such as coated and re-rolled steel; low-, medium- and high-carbon steel alloys; galvanized and stainless steel.
In 1900, The American Rolling Mill Company was founded in the USA, establishing a commercial office in Rio de Janeiro in 1913. In 1993, all subsidiaries outside the US were sold, including the Brazilian units. In that year, through a management buy-out operation, Armco do Brasil S.A. became 100%-owned by its key managers. Armco is owned by Mr. Gilberto Fedi, Mr. Levon Kessadjikian, and Mr. Roberto Gallo, who are all well-reputed in the Brazilian business community. Armco’s headquarters and principal site is in Vila Prudente, near Sao Paulo city. The company also operates two smaller service center sites in São Bernardo do Campo and a steel service center plant in the free trade zone of Manaus, providing metal parts for the motorcycle industries in the region.
Armco produces:
- high strength low alloy steel (used for auto parts, items for passive safety, and parts for bicycles, motorcycles and tubes);
- flat wire (umbrella frame stock, lumbar supports, flexible hoses and furniture hinge spring);
- high speed steel (jigsaws, hacksaws, power saws, circular saws, pump vanes, tissue cutting knives and textile knives);
- high carbon (springs, horn diaphragms, bicycle, agricultural and industrial chains, shoe reinforcement / toe caps, tire scraper blades and machetes among others);
- high carbon hardened & tempered (measuring tapes, hacksaws, springs, elevator contact strips, knives and other);
- stainless steel (turbine buckets, industrial knives, dental equipment, hinges, electronic contacts, flexible cables, electrical appliances and hypodermic needles);
- pre-coated, steel mill (auto parts, electric components, automotive industry, white goods panels and fuel tanks),
- pre coated, cold rolled (electro-electronic components, hardware, home appliances, alkaline batteries, automotive components, decorative parts and tubing); and
- low carbon (auto parts, electronic components, coins, broom handles, bicycle and motorcycle parts).
The company exports 5 to 7% of its output to Latin America, USA, Mexico, Australia, Iran, Thailand, South Africa, and Western Europe. The company has the capacity to export more, however the currency value situation in Brazil hasn’t been favorable.
The project consists of the installation of a new plant at the edge of Jacareí, about 80km from Sao Paulo city. The new plant will modernize and upgrade Armco’s production capabilities, most notably giving it capacity to process 20kg/mm steel coils whereas it is currently has capacity for only 10kg/mm coils. The project will be implemented in 2008-2009 and is estimated to cost $68 million equivalent.
The primary investments include:
- 31 ha of land,
- civil works and erection of about 55,000m2 of production and warehouse facilities,
- acquisition and installation of state of the art equipment; and
- renovating existing equipment.
IFC is considering extending a loan of approximately $25 million to support the project. |
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| Identified applicable performance standards |
While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards (PSs):
- PS1: Social and Environmental Assessment and Management Systems;
- PS2: Labor and Working Conditions;
- PS3: Pollution Prevention and Abatement;
- PS4: Community Health, Safety and Security; and
- PS5: Land Acquisition and Involuntary Resettlement.
Following review it was determined that issues covered by PS6: Biodiversity Conservation and Sustainable Natural Resource Management, PS7: Indigenous Peoples, and PS8: Cultural Heritage are not associated with this project. |
| Environmental and social categorization and rationale |
This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.
Key environment, health and safety and social aspect of the project which were analyzed during IFC’s review were:
- social and environmental assessment;
- environmental, social, and health and safety management systems;
- labor and working conditions;
- pollution prevention and abatement, including chemical management, potable water sourcing, wastewater treatment and disposal, solid and hazardous waste management, other utility usage, and energy use management;
- community health, safety and security, including life and fire safety of nearby communities;
- land acquisition, site location, planning, and permitting; and
- Interaction with local communities. |
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| Key environmental and social issues and mitigation |
PS1: Social and Environmental Assessment and Management Systems:
Armco has detailed Environmental and Social Management Systems (ESMSs), based upon environmental policies committing the Company to environmentally-conscious product development and manufacturing operations. Armco is certified ISO 9001:2000, ISO 14001, OHSAS 18001and ISO/TS 16949:2002, which is relevant to supply the automobile and automotive parts industries. Effective application of these management systems is confirmed by routine environmental state inspections at least once per semester.
Environmental, occupational health and safety management within Armco has been the responsibility of the Human Resources Department, which will bring all manufacturing operations into compliance with relevant applicable laws and regulations and IFC’s Performance Standards and applicable Environmental, Health and Safety Guidelines.
The company undertook an environmental assessment for the new plant at Jacareí, where the main issue identified was existing soil contamination at the site. To render the land suitable for the new Armco facility, the local environmental authority SETESB, required from the land owner the implementation of an Action Plan and the reclamation of the soil, which was duly undertaken and the contamination contained. The project will include civil works and erection of about 55,000m2 of production and warehouse facilities, to be built in accordance with IFC environmental and occupational health and safety requirements. The Company will acquire and install state of the art equipment at the new site, which will include adequate pollution prevention and abatement measures. IFC will regularly supervise the project during construction and operation to ensure compliance with applicable Performance Standards.
- PS2: Labor and Working Conditions:
Armco currently employs about 700 people. In the main two sites, Armco Vila Prudente has 480 employees and 150 part time workers, while Armco Vila Nova has 70 employees.
- Terms of Employment
Armco has a well developed Human Resources policies and procedures, which are compliant with local regulatory requirements and materially compliant with IFC’s requirements defined in PS2.
- Human Resources Policies
The company has human resources policies which are communicated in writing to workers through the Management System Manual.
Terms and conditions of employment are communicated through collective bargaining arrangements with the union present in each workplace.
- Working Conditions
The negotiation with the worker unions is coordinated by the Industry syndicate SICETEL That represents Armco in the negotiations and has the autonomy to negotiate a common agreement. Around 50% of the Armco employees’ are syndicated. There is also a policy that rules the outsource contractors employees who need to be formally contracted, who passed the health tests and receive their salaries monthly paying the compulsory taxes in a monthly basis.
Armco has a policy of non-discrimination in the workplace and there is no child or forced labor present.
Overtime - The maximum amount of overtime is 2 hours per day but there is no formal policy ruling it. There is a policy that does not allow longer shifts than the described in the local laws.
- Code of Conduct and Disciplinary policies
The company has a code of conduct which creates communication criteria when the conduct code is broken. The company also has disciplinary policies and policies for accident prevention.
- Work State Inspections
At least once a year the company has routine inspection by local work authorities.
The company is compliant with local work laws and has an OHS management system in place (SGSSO) to monitor health and safety risks monthly. Other program implemented which is a state requirement is the PPRA or program to prevent environmental risks.
- Training
The human resource Department is in charge to plan the trainings for the whole company. Specific trainings such as fire brigade and chemicals brigade are also provided for specific members.
Grievance mechanism – The company has a formal grievance mechanism and maintains formal written records of each complaint and the result obtained.
- Occupational Health and Safety
The company has a well established OHS management systems. Observation showed widespread use of personal protective equipment where appropriate.
PS3: Pollution Prevention and Abatement:
Armco has demonstrated effective management of environmental matters.
- Liquid Effluents
The Effluent treatment station (ETE) is divided in various sub-treatments, each of them designed for a different metals and other chemical compounds, such as copper (Cu), nickel (Ni), zinc (Zn), tin (Sn) and phosphate (PO4--). Effluents are recycled to the production processes after treatment. The various types of remaining sludge are commercialized for various types of applications to the extent possible or disposed of in a certified landfill. This further processing or disposal is done off-site by authorized contractors. The domestic effluent is accumulated in septic tanks and removed for off-site treatment by an authorized company as required.
The quenching process uses a mixture of lead and bismuth. The metals are removed from the steel after quenching and remain in the process. The rolling process generates an oil emulsion waste containing 2 to 3% of oil. After separation and oil recovery, the remaining sludge from the emulsion treatment is disposed to an incineration site once a month. The pickling process uses concentrated hydrochloric acid, which is fully recycled, except for a small degree of carry-over on product.
- Air Emissions
Air emissions are originated in process and utility operations in the plant.
The company has 3 boilers (2 operational and 1 backup) that use natural gas as fuel. Other emissions are generated during the coating processes such as galvanization and quenching and annealing. The emissions are controlled every 3 years due to the lack of legislation in regard to air emissions in the state of Sao Paulo.
The company will institute annual monitoring of air emissions from process sources, with the first monitoring to be undertaken during May 2008. If remedial actions are needed to comply with IFC requirements, necessary technical measures will be defined before IFC’s investment.
- Solid Waste
The scrap generation is around 7.800 metric tons per year, representing 7.6% of the material processed per year. These materials are removed from site by authorized contractors for recycling or disposal.. Several programs are in place to reduce the scrap generation. The company also has a strong recycling policy in place for plastic, metal, glass and paper.
- Hazardous Waste
Hazardous waste has a separate storage area which is covered, has an impervious floor and double containment to prevent spills and soil and water contamination.
- Sustainability
There is a scrap reduction program implement in the company, together with a selective collection of wastes. The company also invested in an efficiency project to recover waste heat from the annealing process (600 to 700º C). Armco’s plant has an effective housekeeping system and show good order throughout.
- Soil Contamination
Currently the new site is occupied by another industrial plant, owned by Hoganas. Hoganas is a Swedish company which deals with metal powder metallurgy and sintered components and is also certified ISO 14.000. The site was also previously owned by ICI and BASF, both chemical companies. Soil contamination by chemical resins had been diagnosed inside the plant in 2002. As a result, an Action Plan was prepared by the local environmental authority, CETESB, requesting the soil reclamation. This Action Plan is finished and the contamination has been satisfactorily remediated.
PS4: Community Health, Safety and Security:
The Vila Prudente site has a formal emergency response plans which include appropriate communication with external parties.
The main complaints are based on ambient noise due to the small distance between the Company and buildings and houses. In 1969 when the operations started, the region was an Industrial district but the city has grown turning the region in a mixed zone. The Company has been continuously developing noise mitigation measures, such as noise filters and sealing of engines, isolation of the noise sources where possible, seal some engines and forbid loading and unloading activities during the night.
PS5: Land Acquisition and Involuntary Resettlement:
The Land acquisition process did not involved population displacement or involuntary resettlemnt. The site acquired in Jacareí is currently occupied by another industry, is located in an industrial area, and will be acquired on a willing buyer/seller basis. |
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| Client's community engagement |
Projeto Plantar - Contribution on the children formation by the complementary education, food and care for the poor children in the neighborhood. The project assists 35 children part time in 2007 and 50 in 2008, with a budget of R$ 400.000 per year.
Since 1997, the company has developed a program of community meetings in Armco dependencies. In addition to discussing noise, the Community meetings also deal with other interests in common such as streets illumination, the use of the company’s sports gym by local children and safety issues. The company has also prepared a program with partnership with the fire fighters for the community, including evacuation plan in case of an uncontrolled fire. |
| Local access of project documentation |
All sites publicize a contact number, to be used in the event of a grievance or complaint on their websites.
This Environmental and Social Review Summary, and associated Environmental and Social Action Plan will be disclosed at the following locations close to Armco’s manufacturing operations.
Armco headquarters – Vila Prudente
Rua Zacarias Alves de Melo, 180 – Vila Prudente
Sao Paulo – SP – Brasil
Jacareí site (at the gatehouse).
Av. Humberto de Alencar Castelo Branco, Pres,
2705, Jd Siesta, Jacareí, SP, Brasil
The company may be contacted though the following representatives:
Mr. Narciso Fabri, CFO
Rua Zacarias Alves de Melo, 180 – Vila Prudente
Sao Paulo – SP – Brazil
Telephone: (55 11) 6343-2876
Fax: (55 11) 6343-2877
E-mail: narcisofabri@armco.com.br |
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| Availability of Full Documentation |
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| Information Disclosed |
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