Brazil Metals Report Q4 2011
Business Monitor International, November 2011, Pages: 57
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.
BMI's latest Brazil Metals Report doubts the country is able to justify an increase in steelmaking as large as planned and does not believe some of the larger projects will go ahead. A moderation in domestic demand growth, a high tax burden coupled with high interest rates, and a strong real will militate against sustained high rates of output growth.
Growth in the production of crude steel was strong at 7.8% in the first eight months of 2011, while rolled steel production fell 3.1% and domestic sales rose just 0.6%. The Brazilian steel industry managed to offset poor domestic performance with 43.5% growth in export volume while imports fell 35%. Much of the decrease was seen in the early months of the year with an acceleration in import growth from June.
As 2011 progressed, consumption rates came under pressure with BMI forecasting crude steel output growth of 6% and hot-rolled output growth of 0.5% for the full year. Rises in raw material costs mean no improvement in earnings over the short-term, but on the upside prices should remain stable.
Over 2012, the strength of the currency will create more challenging conditions for Brazilian steelmakers. Some are pushing for more vertical integration with the mining sector to reduce costs, but mining is becoming more profitable as an export business in its own right. As such, steelmakers are not looking to ramp up output in the medium term, but rather increasing iron output to make up for reductions in steel margins.
Lack of export opportunities will force steelmakers to rely on the domestic marking, thereby limiting opportunities for expansion. On current plans, by end-2015 Brazilian crude steel capacity could increase by up to 30mn tpa assisted by ThyssenKrupp's Rio de Janeiro slab mill joint venture (JV) with Vale that will raise output by 67% to 5mn tpa by 2012 following expansion to 3mn tpa in 2011. However, around 40% of its output is destined for Europe with the rest sold in the US, where markets are weakening.
The Brazilian aluminium industry is faring badly with output down 7.1% in the first eight months of 2011. This confirms BMI's forecast of 1.45mn tonnes for the full year, a decline of 5.5% year-on-year (yo- y). Novelis's 47.6% decline in output is the result of the closure of its Aratu smelter, while its Ouro Preto smelter saw no change in production volumes. The Companhia Brasileira de Aluminio smelter also reported a 16.9% decline in output, which helped outweigh the increase in output reported by smelters owned by Albras, Alcoa and BHP Billiton.
In addition to the value of the real, high energy prices are hampering future growth prospects in output and much of the projected increase in consumption will benefit imports. Smelter closures are related to the rising cost of electricity and an influx of cheaper imports from China, a situation that is likely to be sustained over the medium term.
Executive Summary
SWOT Analysis
Brazil Political SWOT
Brazil Economic SWOT
Brazil Business Environment SWOT
Global Market Overview – Steel Forecast
Table: BMI's Steel Forecast
Table: Steel Price Data
Commodities Forecast – Metals Update
Gold
Copper
Aluminium
Lead
Nickel
Tin
Zinc
Industry Forecast Scenario
Steel
Table: Brazil's Steel Industry, 2008-2015 (‘000 tonnes, otherwise unless stated)
Aluminium
Table: Brazilian Consumption Of Aluminium Processed Products (‘000 tonnes)
Table: Brazilian Primary Aluminum Production By Producer (000 tonnes, unless otherwise stated)
Macroeconomic Forecasts
Table: Brazil – Macroeconomic Activity, 2008-2015
Competitive Landscape
Steel
Aluminium
Table: Brazilian Aluminium Smelters
Company Profiles
Alcoa
ArcelorMittal
Companhia Siderúrgica Nacional (CSN)
Gerdau SA
Vale
Usiminas
Global Assumptions, Q411
Table: Global Assumptions, 2009-2015
Table: Global And Regional Real GDP Growth, 2010-2013 (% change y-o-y)
Table: Developed Market Exchange Rates, 2010-2013 (average)
Table: Emerging Market Exchange Rates, 2010-2013 (average)
Table: Developed States' Real GDP Growth, 2010-2013 (% change y-o-y)
Emerging Markets
Table: Emerging Markets' Real GDP Growth Forecasts, 2010-2013 (% change y-o-y)
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
- Alcoa
- ArcelorMittal
- Companhia Siderúrgica Nacional (CSN)
- Gerdau SA
- Usiminas
- Vale
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