Brazil Mining Report Q4 2013
Published by Business Monitor International
on Oct 8, 2013
, 96 pages
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Brazil's mining sector will experience continued, though slower, growth as weaker foreign demand for iron ore and other base metals weighs on Brazilian exports. The country's large untapped reserves and relatively small mining sector relative to regional peers should ensure continued investment. Iron ore production will continue to be the main driver of mining sector investment, but we expect growth in several base metals, as well as gold, providing opportunities for mining companies and investors. Still, falling demand from China and still weak developed world growth will lead to muted growth over the next several years compared to the heady expansion of the past decade.
Our forecast for relatively muted sector growth stems from our forecast for lower average iron ore prices, as well as weak nominal growth in base metals. We forecast iron ore prices will average US$110/tonne in 2014 and US$100/tonne in 2015. Given Brazil's status as the world's second-largest iron ore producer, negative price trends for iron ore, which contributes approximately 85% of the country's total mining export value, have an outsized effect on the Brazilian mining sector. Our below-consensus view on Chinese economic growth and belief that steel-intensive fixed asset investment will slow, as well as general weakness in demand growth both from China and the developed world, lead us to forecast modest industry growth. However, we still expect iron ore production growth to increase as new mines long in development come online and as firms remain reluctant to cut back existing production.