Brazil Metals Report Q2 2011

Business Monitor International's Brazil Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Brazil's metals industry.

Brazil’s steel and aluminium industries are coming under increasing pressure from the influx of imports, which are taking an increasing share of the country’s burgeoning metals market. Margins are being squeezed by high costs, notably in raw materials and energy.

Despite the challenges, Brazilian steelmakers continue to enjoy higher rates of output with a notable recovery in long steel output in Q111, although crude output is still 5% below full potential and producers were facing a squeeze on margins due to import prices. For the first two months of 2011, Brazil’s crude steel output rose 8.0% year-on-year (y-o-y) reaching 5.55mn tonnes, while its rolled steel output increased by 5% to 4.05mn tonnes, including 2.44mn tonnes of flat products (up 5.6%) and 1.61mn tonnes of long products (up 4.1%).

Conditions will remain challenging for industry players throughout 2011 due to over-capacity, high costs of iron ore and scrap and limited pricing power in segments such as steel products used for the auto sector. The key drivers of growth in 2010, investment and private consumption, are likely to cool in 2011 as monetary and fiscal stimulus measures are withdrawn, with a knock-on effect on sales volumes. As such, BMI forecasts domestic finished steel consumption growing by a more modest 7.0% to 25.65mn tonnes in 2011, compared with the 27.3% growth estimated in 2010. Meanwhile, protectionist measures will not prevent a 16.3% rise in imports to 5.69mn tonnes, an upward revision from the 4.55mn tonnes previously forecast, due to the continued strength of the real. We expect the intervention of minimum pricing and domestic market expansion to support output growth over the medium term, leading to crude steel output of 46.22mn tonnes and hot-rolled output of 35.51mn tonnes by 2015, up 45% and 52% on respective 2010 levels.

Production in the aluminium sector remained flat in 2010 despite a 28.5% y-o-y rise in consumption of aluminium fabricated products to 1.3mn tonnes, 100,000 tonnes above the forecast by industry body Abal. Brazilian primary aluminium production reached 1.54mn tonnes, up just 0.1% y-o-y and well down on the 1.63mn tonnes in 2008. Most smelters saw output stagnate or decline slightly. This was outweighed by a 35.1% rise in output at Alcoa’s Poços de Caldas smelter to 88,200 tonnes. The planned closure of Novelis’s aluminium smelter in Aratu will remove 60,000 tonnes per annum (tpa) of capacity, although BMI does not believe this will have a major effect on overall Brazilian output. The smelter, which is small and outdated by global standards, was closed after ramping up losses. The closure came over a year after the closure of Valesul’s 94,000tpa smelter due to high energy prices. Smelter closures are related to the rising cost of energy and an influx of imports from China. BMI believes Brazilian aluminium production will come under assault from a combination of cheap imports, exacerbated by the strength of the real, over the medium term. Cheaper imports are taking up more local demand growth, which could rise by a further 9% in 2011. In order to halt the decline in domestic production, Abal has called for action against imports from China in the form of tariffs to counter the 12-15% export rebate Chinese aluminium exporters enjoy. SHOW LESS READ MORE >

Executive Summary

SWOT Analysis
Brazil Political SWOT
Brazil Economic SWOT
Brazil Business Environment SWOT

Steel To Average US$580/Tonne In 2011
Table: BMI’s Steel Forecasts
Table: Steel Prices (US$m/t)

Commodities Forecast
Aluminium
Copper
Lead
Nickel
Tin
Zinc
Gold
Industry Forecast Scenario
Steel
Aluminium
Table: Brazilian Consumption Of Aluminium Processed Products (‘000 tonnes)
Table: Brazilian Primary Aluminum Production by producer (000 tonnes unless otherwise stated)
Table: Brazil’s Metals Industry (‘000 tonnes unless stated)

Macroeconomic Forecasts
Table: Brazil – Economic Activity
Competitive Landscape
Steel
Aluminium
Table: Brazilian Aluminium Smelters
Table: Brazilian Primary Aluminum Production by producer (000 tonnes unless otherwise stated)
Table: Domestic Consumption Of Aluminium Transformed Products

Company Profiles
ArcelorMittal
Gerdau SA
Vale
Alcoa
Companhia Siderúrgica Nacional (CSN)
Usiminas

Global Assumptions, Q211
Table: Global Assumptions, 2009-2015
Table: Regional Real GDP Growth, 2010-2013 (% change y-o-y)
Table: Selected Exchange Rates, 2010-2013 (average)
Developed States
Table: Developed States’ GDP Growth, 2010-2013 (% change y-o-y)
Emerging Markets
Table: Emerging Market’s GDP Growth, 2010-2013 (% change y-o-y)
Consensus Forecasts
Table: Consensus Forecasts, 2011 And 2012

Country Snapshot: Brazil Demographic Data
Section 1: Population
Table: Demographic Indicators, 2005-2030
Table: Rural/Urban Breakdown, 2005-2030
Section 2: Education And Healthcare
Table: Education, 2000-2003
Table: Vital Statistics, 2005-2030
Section 3: Labour Market And Spending Power
Table: Employment Indicators, 1999-2004
Table: Consumer Expenditure, 2000-2012 (US$)
Table: Average Annual Wages, 1996-2002

BMI Methodology
How We Generate Our Industry Forecasts
Cross Checks

- ArcelorMittal
- Gerdau SA
- Vale
- Alcoa
- Companhia Siderúrgica Nacional (CSN)
- Usiminas