Brazil Mining Report

Published 02 April 2015

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Brazil Mining Report

BMI View: Brazil's mining sector will grow steadily over our forecasts to 2019. However, the country's mining industry's value growth will slow over the coming years. Still , mine output will expand as both domestic and foreign firms increase production of both industrial and precious metals.

Brazil's mining industry value will grow 3.3% on average per annum to 2019, largely on the back of iron ore sector investment and output. Iron ore makes up around 85% of the country's total mining export value, though weak prices will mitigate the positive effect of growing export volumes. In the case of iron ore, we forecast prices will average lower year-on-year (y-o-y) in 2015 at USD60/tonne, compared to USD97/tonne in 2014. Beyond 2015, prices will experience nearly flat growth to 2019. Nevertheless, Brazilian firm Vale will continue to take advantage of its low unit costs and seek to increase its global market share as higher-cost production in other countries comes offline. Vale cited cash costs slightly above USD23/tonne in Q414, with costs dipping to as low as USD11/tonne for certain mine assets. Furthermore, US dollar strength, and resultant depreciation in the Brazilian real, will further cap input costs, which are denominated in local currency. Shipping times and costs to China are longer and higher compared with Australian iron ore producers though, which may lead to Australian producers capturing a greater share of the Chinese iron ore import market.

Growth To Resume, But No Return To Boom
Brazil - Mining Industry Value & Growth
e/f = BMI estimate/forecast. Source: BMI, IBGE

Brazil will also see positive base and precious metals production growth despite a more muted external market. Bauxite and nickel production growth will continue, though we believe gold output is likely to grow the slowest in percentage terms due to falling gold prices through 2016. Indonesia's ongoing ban on unprocessed nickel and bauxite ore, and its higher purity...

Table of Contents

BMI Industry View
7
SWOT
10
Industry Forecast
12
Bauxite: Multi-year Production Growth
12
Foreign Firms To Drive Growth
12
Risks To Outlook
13
Table: Bauxite Production Forecast (Brazil 2011-2019)
14
Gold: Weaker Prices To Slow Production Growth
14
Table: Select Greenfield Gold Projects
15
Table: Gold Production Forecast (Brazil 2011-2019)
15
Iron Ore: Growing Production Despite Flat Price Growth
16
Vale To Stay On Top
16
Risks To Outlook
18
Table: Iron Ore Production Forecast (Brazil 2011-2019)
19
Nickel: Production Growth On Modest Price Gains & Chinese Demand
20
Table: Nickel Production Forecast (Brazil 2011-2019)
21
Tin: Minimal Growth, But Risks To Upside
22
Indonesian Ban To Boost Brazilian Market Share
23
Table: Tin Production Forecast (Brazil 2011-2019)
23
Industry Risk Reward Ratings
24
Americas Risk Reward Index
24
Regional Risks Increase Modestly
24
Weak Prices To Hurt, While Stronger Dollar A Mixed Blessing
25
Regional Outlook Unchanged Despite Some Reordering
26
Table: Americas - Mining Risk/Reward Index
27
Brazil Risk/Reward Index
28
Rewards
28
Industry Rewards
28
Country Rewards
28
Risks
29
Industry Risks
29
Country Risks
30
Table: Brazil - Mining Production & Growth
30
Regulatory Development
31
Recent Developments
31
Potential Clarification Ahead
31
Higher Royalties Could Present Modest Challenges
32
Licensing & Permitting Difficulties Show No Sign Of Abating
32
Tax Regime
33
Persistent Corruption Being Addressed
34
Table: Brazil - Political Overview
34
Table: Regional Regulatory Index
35
Commodities Forecast
37
Commodity Strategy
37
Ferrous Metals
37
Iron Ore: Price Weakness To Continue Over Coming Years
37
Steel: Oversupply To Drag Down Prices
39
Non-Ferrous Metals
42
Aluminium: Continued Weakness, But No Sharp Downturn
42
Copper: Recent Relief Rally To Fade
43
Lead: Prices Weakness To Continue
45
Nickel: Subdued Prices Due To Weak Demand Growth
46
Tin: Supply Deficits To Underpin Rally In Tin Prices
46
Zinc: Positive Multi-Year Outlook, But Increasing Risks In Months Ahead
47
Table: Select Commodities - Performance & BMI Forecasts
48
Competitive Landscape
50
Table: Financial Data For Key Firms Listed In Brazil
50
Foreign Firms Maintain Interest In Base & Precious Metals
51
Golden Opportunities Losing Shine
51
Company Profile
52
Global Company Strategy - Alcoa - Q2 2015
52
Company Overview
53
Company Strategy
53
Latest Results
54
Table: Alcoa - Key Financial Data
54
Table: Alcoa - Supply Chain Analysis
55
Company Details
56
Global Company Strategy - Vale - Q2 2015
56
Company Overview
58
Company Strategy
59
Latest Results
60
Table: Vale - Supply Chain Analysis
61
Table: Vale - Key Financial Data
62
Company Details
62
Global Company Strategy - Anglo American - Q2 2015
62
Company Strategy
64
Latest Results
65
Table: Anglo American - Financial Data
66
Regional Overview
67
Three Key Themes For Americas Mining
67
Regulatory Changes On Horizon
67
Dollar Strength To Be Mixed Blessing
69
Region To Grow More Dominant As Top Copper Source
70
Global Industry Overview
71
Global Overview
71
2
74
3
75
5
79
Methodology
81
Industry Forecast Methodology
81
Sources
82
Risk/Reward Index Methodology
83
Table: Weighting Of Indicators
84

The Brazil Mining Report has been researched at source and features Business Monitor International (BMI)'s mining and commodity forecasts for metals, minerals and gems, covering all major indicators including reserves, production, exports and values. The report also analyses trends and prospects, national and multinational companies and changes in the regulatory environment.

BMI's Brazil Mining Report provides industry strategists, service companies, company analysts and consultants, government departments, trade associations and regulatory bodies with BMI's independent forecasts and competitive intelligence on the mining industry in Brazil.

Key Benefits

  • Use BMI's independent industry forecasts on Brazil to test other views - a key input for successful budgeting and planning in this mining market.
  • Target business opportunities and risks in Brazil's mining sector through our reviews of latest mining industry trends, regulatory changes and major deals, projects and investments in Brazil.
  • Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. KPIs and latest activity), Key Projects Tables and Competitive Landscape Tables.

Coverage

BMI Industry View

Summary of BMI’s key forecasts and industry analysis, covering mining reserves, supply, demand and prices, plus analysis of landmark company developments and key changes in the regulatory environment.

Industry SWOT analysis

Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the mining sector and within the broader political, economic and business environment.

BMI Industry Forecasts

Historic data series (2009-2013) and forecasts to end-2019 for key industry and economic indicators, supported by explicit assumptions, plus analysis of key risks to the main forecasts. Indicators include:

  • Mining industry: Industry size (USDmn), real growth (%), % of GDP, employment (‘000), workforce as % of total workforce, average wage (USD).
  • Output: Production volumes (‘000 tonnes, carats etc.) for all major metals, minerals, ores and gems mined in each state, including bauxite, copper, gold, coal, lead, silver, tin, titanium, uranium, zinc etc.
  • Exports: Value of exports (USDmn) for all major metals, minerals, ores and gems mined in each state.
  • Commodity markets: Global demand, supply, stocks and benchmark prices (USD) for aluminium, copper, lead, nickel, tin, zinc, gold and steel.

BMI’s Mining Risk Reward Index

BMI’s Risk Reward Indices provide investors (mining companies and support service providers) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.

Competitive Landscape Tables & Analysis

Comparative company analyses and tables detailing USD sales, % share of total sales, number of employees, year established, market cap/NAV, ownership structure, production and % market share.

Key Projects

Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by metal/ore.

Company Profiles*

Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.

Sources

The Mining reports are based on an extensive network of primary sources, such as multilateral organisations (UN, WB, IMF), national chambers of commerce and industry, national statistical offices, government ministries and central banks, and multinational companies.

*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.

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Testimonials

'An essential, multi-faceted research tool. BMI’s thorough understanding of the major market players enables an informed – and informative – review of the sector’s actual performance, together with useful insights into current industry issues, which are topped-off with detailed and invaluable forecasts of industry and macroeconomic trends.’

Senior Research Analyst, ABC International Bank plc