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New Market Study Published: Brazil Mining Report Q1 2012

New Materials research report from Business Monitor International is now available from Fast Market Research


Boston, MA -- (SBWIRE) -- 05/19/2012 -- Domestic and foreign demand for mineral resources will spur a period of rapid growth in Brazil's mining sector, as investment exploits substantial untapped reserves. Iron ore will remain by far the primary driver of Brazilian mining growth, although base metals and gold will provide additional opportunities for sector development. Infrastructure investments in the run up to the World Cup and Olympics will allow more efficient and cost effective extraction and transport of mineral resources. We forecast that Brazil's mining industry will contract in 2012, primarily on the back of moderated iron ore prices. We expect the industry value to reach US$66.6bn in 2015, up from US$55.4bn in 2011. Driven by strong global demand for iron ore at home and abroad, we forecast average annual industry growth of 9.0% between 2011 and 2015.

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Continued Growth In Iron Ore Production

Brazilian iron ore miner Vale will continue to dominate the industry. The company's performance in 2011 supports our view that the iron ore is driving sector growth. While concerns remain over slowing Chinese economic growth, we expect China will be the largest importer of Brazilian iron ore for the foreseeable future. We forecast total iron ore output will reach 638.5mnt (mn tonnes) by 2015, as companies bring multiple large projects online. Average growth over our 2011-2015 forecast period is expected to be an impressive 11.6% year-on-year (y-o-y).

Vale's H111 iron ore production was 151.8mnt, a y-o-y increase of 4.7%, as it increased output from the Carajas mines in Brazil. As production at Carajas continues to ramp up, we expect Vale to produce 322mnt in 2011, 4.3% higher than 2010 levels. Iron ore will be the mainstay of the company's growth, with the Carajas Serra Sul mine in Brazil expected to reach 90mntpa (mn tonnes per annum) in 2014.

Regulatory Environment

While the administration of President Dilma Rousseff is committed to continuing her predecessor's probusiness policies, discussions of reforming Brazil's mining tax laws continue. The government is in the process of approving revisions to the mining tax and industry regulatory bodies, although details and a timeline for final approval remain unknown. Government intervention in the mining sector remains a threat, especially in light of the government's ownership stake in Vale and its recent pressure to change company management.

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