Brazil Country Market
Insights and Opportunities
Mining Equipment Sector
Overview: Brazil is the world’s fifth largest mineral producer and has one of the world’s largest mining equipment markets. The mining sector in Brazil was expanding at very high rates during the last 10 years and breaking nearly all records every year, but since August 2008 a sharp downturn has prevailed in the market.
As of February 2009, most analysts say that it is still very unclear how the market will evolve during the next two years. Most analysts expect that it will take at least two to three years for the market to reach the output and price levels of August 2008. A recovery will depend basically on the international demand for raw materials. The Brazilian mineral potential still has not been fully surveyed, and significant discoveries of mineral deposits are still expected in the future. Most of Brazil’s mines are open pit so the underground mining equipment market is relatively small, though more underground mines are expected to open in the next 3 - 7 years.
Brazil’s largest installed mining operations are for iron ore, with 2008 output at 409 million metric tons/year (Mt/y), representing nearly 19% of the world’s total. Brazil also produces bauxite (26.6 Mt/y in 2008, or 13% of the world’s total), gold (55 t/y in 2008), kaolin (2.5 Mt/y), manganese (2.4 Mt/y), niobium (86,000 t/y, with 94% of the world reserves), potassium chloride (KCl) (650,000 t/y), phosphate concentrate (6 Mt/y), zinc (185,000 t/y of metal content) and cement (50 Mt/y in 2008). Brazil’s coal production is relatively small and has been stagnant for the last 20 years. The output in 2008 was only 11 Mt/y of steam coal, but is planned to reach 20 Mt by 2013, in order to supply several new local coal power plants.
Brazil is one of the largest importers of metallurgical coal, used basically by its steel manufacturers. It imported 16.1 million metric tons (US$1.75 billion) of metallurgical coal in 2006. The main supplier countries were Australia (35% of the total imported in 2006), U.S.A. (26%), Canada (9%), China (7%) and South Africa (4%).
The largest Brazilian mining company Vale has made large investments in coal mining in Australia and in Mozambique in the last three years. It had an output of 4.1 Mt of coal in Australia during 2008 being 68% metallurgical coal and 32% steam coal. In Mozambique, Vale is currently building a mining and railroad complex to start exporting coal in 2011. The total deposits are 2.5 billion metric tons and the total output is planned to reach 40 Mt/year. Vale also bought in 2008 a coal project in Colombia, to start producing 4.8 Mt by 2011.
VALE: Companhia Vale do Rio Doce: Brazil’s largest, and the world’s second largest, mining company is Companhia Vale do Rio Doce. The company recently changed its brand name to VALE. Privatized in 1997, VALE is responsible for more than 50% of Brazil’s mineral output based on value, and represents an excellent opportunity for US equipment suppliers.
VALE produces nearly 90% of Brazil’s iron ore; 100% of Brazil’s potash, 85% of manganese, 43% of kaolin, 80% of bauxite, and it is also the top player in aluminum, copper, and nickel production. The output of its main minerals in 2008 was 302 million metric tons (Mt) of iron ore, 275 kt nickel, 11.6 Mt of bauxite, 5.0 Mt of alumina, 543 kt of aluminum, 311 kt of copper, 607 kt of potassium chloride, 1.1 Mt of kaolin.
VALE is also the top logistics player in Brazil, especially for ports and railroads, not only for its own use, but also as a supplier of logistics services to other companies. It is the largest Brazilian consumer of electricity. In the last five years, VALE has become very internationally diversified, having bought the Canadian company INCO (the world’s largest nickel producer); plus the above mentioned coal projects, and many other projects in Latin America, Africa and Asia. Between 2002 and 2007, VALE was the Brazilian company with the highest increase in share value for investors at the stock exchange.
VALE had been breaking its own records every year, and had shown very high rates of growth in practically all its activities in the last ten years, until September 2008. In the last quarter of 2008 however, due to the crisis in the international market, situation changed dramatically in the mining sector and Vale has also been hard hit like most other mining companies. In December 2008 Vale bought Rio Tinto’s iron ore assets in Brazil, and potassium assets in Argentina and Canada, for a combined amount of US$ 1.6 billion.
Anglo American has two large iron ore projects in Brazil. It officially announced in December 2008 that it is delaying start up of these operations for one year, to 2010 and 2012. Anglo is also delaying by nearly one year its big nickel project “Barro Alto,” expected to start up in 2010 with an output of 36,000 kt/year in ferro-nickel alloys. Besides, AngloGold is the second largest gold producer in Brazil.
ArcelorMittal bought in 2008 a large iron ore project in Brazil, with an output of 3.8 Mt in 2008, being expanded to 10 Mt in 2012.
MMX, a new company that had started three large iron ore projects in Brazil in 2007, has been hard hit by falling prices in the market. Its main project is now on hold and the two others have been sold to Anglo American. Besides, it is developing two iron ore projects for nearly 5 to 10 Mt/year each one, which may also be delayed.
Gold: The total Brazilian output of gold is expected to expand from 51 t/y in 2008 to 100 t/y of gold metal in 2013, according to the Brazilian Ministry of Energy and Mines. The Canadian Kinross Group became Brazil’s largest gold producer in 2008, when it started up a new project of US$ 550 million and increased its output of gold metal from 5.4 to 17.2 metric tons o / year. Other large gold producers in Brazil are AngloGold Ashanti, Yamana Gold and Jaguar.
Brazil has a very limited market for turnkey machinery, as a number of leading multinationals have manufacturing facilities in Brazil, with some even exporting their products abroad. Among those already in Brazil are Caterpillar, Volvo, Case New Holland, Cummins, Ingersoll Rand, Metso, Atlas Copco, Sandvik, Siemens, Alston, Scania, ABB, 3M, Liebherr and GE. These equipment manufacturers, though, provide excellent opportunities for US parts and components for earth-moving equipment, belt conveyors, crushers and grinding equipment, laboratory instruments, and drill bits and equipment.