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* Net income rises 16-fold in Q1, beats estimates

* CEO says not worried about crisis in Spain

(Adds CEO comments, background on iron ore, steel prices)

By Guillermo Parra-Bernal and Alberto Alerigi Jr.

SAO PAULO, May 6 (Reuters) - Gerdau, Brazil's largest maker of steel for the construction industry, will raise prices for some products after a surge in raw material costs threatened to erode profits, Chief Executive Andre Gerdau Johannpeter said on Thursday.

Latin America's largest steelmaker reported earlier in the day that net income rose more than 16-fold in the first quarter, beating analysts' forecasts, after expenses fell and revenue was bolstered by higher demand for steel in its home market.

Iron ore prices doubled recently after miners scrapped a decades-long system that set prices annually and replaced it with quarterly adjustments. Steelmaking hinges on long-term price stability and often suffers if the cost of iron ore, the main raw material, swings too much over a short period of time.

"Unfortunately, there is no way we will be able to absorb all these impacts" such as the doubling of iron ore prices in the current quarter, Gerdau Johannpeter said on a conference call. "We will probably have to adjust prices around the world."

Apart from ore, Gerdau (GGBR4.SA)(GGB.N) relies on supplies of scrap from vehicles, building supplies and surplus materials to produce new steel. Scrap metal prices have also risen this year.

Gerdau Johannpeter's remarks suggest the company is gaining pricing power after output almost doubled in Brazil from a year earlier. Production of crude steel surged in Gerdau's North America units, while specialty steel output jumped 148 percent from the previous year.

The shares of the Porto Alegre, Brazil-based company were up 0.4 percent to 27.22 reais at midday in Sao Paulo.

Activity across Latin America and Spain is recovering gradually, he said. Management is not concerned about the business impact of the sovereign debt crisis now afflicting the euro zone and Spain, specifically, Chief Financial Officer Osvaldo Schirmer said.

"We have information that the situation is less vulnerable than in Greece, for instance," he said. "We have bigger exposure to Brazil and North America and we have enough cash in hand to face any credit event."

Financial markets around the world have plunged on concern that several European countries could stop servicing their debt. With investors already betting Greece will fail to refinance its current liabilities and cut the region's largest budget gap, the focus has now turned to Spain.

Gerdau has specialty steel operations in Spain. Steel products sales for the automotive industry in the country have increased, suggesting an incipient recovery, Gerdau Johannpeter said.

Brazil accounts for 40 percent of output and 28 percent of Gerdau's sales.

PROFIT SURGE

Profit surged to 573 million reais ($319 million) from 35 million reais a year earlier, according to a securities filing. The company was expected to earn 554 million reais, according to a Reuters poll of six analysts.

Sales, general and administrative expenses fell 16 percent, while costs dropped 8 percent.

Results were also probably helped by a low base of comparison year-on-year. A year earlier, the onset of the deepest global recession since the 1930s crippled demand, forcing Gerdau and rivals to halt production at some mills, switch off blast furnaces and idle workers.

Revenue rose 2 percent to 7.11 billion reais, led by a surge in sales in Brazil, where output doubled as inventory declined. Revenue from the North America and Latin America divisions dropped, while that from the specialty steel unit rose.

Earnings before interest, taxes, depreciation and amortization, a measure of operational profitability and cash generation known as EBITDA, more than doubled from a year earlier to 1.40 billion reais, but fell short of the analysts' estimate of 1.45 billion. EBITDA was 1.25 billion reais in the 2009 fourth quarter.

Losses in currency-related hedge contracts, which Gerdau uses to protect cash and debt-servicing provisions against currency fluctuations, limited the rise in net income, the filing said.

The net shortfall from the contracts totaled 70.9 million reais in the quarter, compared with a surplus of 31.5 million reais a year earlier.

Profit was 643 million reais in the fourth quarter of 2009. ($1=1.798 reais) (Reporting by Guillermo Parra-Bernal and Alberto Alerigi Jr; editing by Elzio Barreto and Andre Grenon)