The financial crisis has
severely though not homogenously impacted South
America. The continents main economies of Argentina,
Mexico, Colombia, and Peru are starting to heal their economic
wounds after a tough year.
Also among them is Brazil. An
important player on the international economic stage, the
country has suffered heavily from the impact of the global
downturn, particularly during the second and third quarter of
Brazil found itself in one of the
direst situations of recent times, highlighted by the fact
unemployment was at its highest level in nearly ten years,
654,946 higher than predicted by President Luiz
Incio Lula da Silva. The biggest cuts came in
construction and automobiles, key volume markets for industrial
IBAR produces magnesite in Brumado, Minas Gerais,
just a few kilometres from Magnesitas mine,
seen here across the valley in the background.
Brazilian magnesite will be covered in a follow-up
feature in IM February 2010.
One of the major negative impacts on Brazils industrial
minerals industry is not just the drop in demand from end
markets, but the fall in revenue owing to the exchange rate of
the Brazilian real (R$) against the US dollar, particularly as
most companies trade in the US$.
As a consequence of the global
downturn, some of the main companies in Brazil had to reduce
production over the last year, such as magnesite and
refractories producer Magnesita Refratorios SA, and kaolin
producers Vale SA and Rio Capim Caulim (RCC), the latter a
subsidiary of French mining giant Imerys.
However, as reported by the
International Monetary Found (IMF), South America is starting
to experience cautious optimism, showing signs of
stabilisation, with Brazil leading the way to recovery over
Argentina and Mexico.
Brazils economy appears to be
bouncing back quickly from the global recession. This is in
part owing to its large domestic market and diversified export
products and markets, and especially the increasing links to
The fifth largest population in the
world and a major food (1st) and oil producer
(14th), Brazil owns a wide range of industrial
mineral and farming resources, ranking among the world top-ten
producers for steel, iron, coffee, cotton, meat, phosphate,
graphite, fertilisers, cement, and ceramic tiles (see
Brazil at a glance). Therefore, Brazils promise as
an Eldorado for investors may not be so far
As Switzerland-based Holcim Ltd,
the second world leading cement producer with operations in
Brazil, confirmed to IM, the perspectives are
very promising and there are many opportunities in the
Cement is among the main industries
starting to kick off. Leading Brazilian magnesite producer
Magnesita Refratorios SA reported to IM that
the Brazilian cement industry, boosted by stronger demand from
construction, practically did not feel the crisis,
maintaining stable demand for refractories.
Among the positive factors that
will allow future market growth are several initiatives of the
Brazilian government, such as the programme Minha Casa,
Minha Vida (My House, My Life); the Growth Acceleration
Plan (PAC) of the Federal Government, and obviously, the
preparation of the cities that are going to host the FIFA World
Football Cup in 2014 and the Olympic Games in 2016.
Another growing sector is the
fertiliser industry, since Brazil is a major food, biofuel, and
fertiliser producer. Edison Lobeo, Brazils Minister of
Mines and Energy (MME), revealed to IM that
the first move of the country will be to develop its phosphate
resources in order to become fertiliser self-sufficient within
the next four years.
production in Brazil
Towards fertiliser autonomy?
The long-term outlook for
fertiliser demand is promising, considering the prospects for
both food consumption and biofuel use, commented Vital
Jorge Lopes, chief executive officer of Fertilizantes
Fosfatados SA (Fosfertil), Brazils leading fertiliser
Brazil has indeed a relevant
position in terms of global fertiliser consumption as it is the
fourth largest consumer of fertilisers in the world, following
China, India, and the USA.
In 2008, the country accounted for
approximately 6% of the global consumption of NPK
(Nitrogen-Phosphorus-Potassium) fertiliser, and an estimated of
9.4m. tonnes of nutrients (22.3m. tonnes of products) in
The increase in harvest
productivity in Brazil is due, among other factors, to the use
of agricultural technology, in particular in fertilisers. The
sector has grown remarkably over recent years, following the
strong development of the agribusiness industry and
contributing to the creation of jobs in Brazil.
Brazil has the highest growth rate
in fertiliser usage among the worlds top four consumers
and its fertiliser consumption represents 70-75% of South
Over the last ten years, fertiliser sales in Brazil posted a
4.3% Compound Annual Growth Rate (CAGR), reaching 22.4m. tonnes
in 2008, above the GDP 10-year CAGR of 3.3% for the
However, the domestic market depends heavily on imports. The
robust growth of domestic fertiliser sales in Brazil in the
last 10 years has been supported by increasing imports. In
2008, fertiliser imports amounted to 15.4m. tonnes of nutrients
and accounted for 63% of fertiliser supply in Brazil (excluding
inventories), compared with 50% in 1998.
During the last ten years,
Brazils fertiliser market has grown by over 50%,
resulting in a huge fertiliser production base and demand for
feedstock minerals production. One of the main reasons is
the growth of food and biofuel consumption, which will
ultimately translate in a higher planted area and applications
rates of fertilisers, said Lopez.
Calorie consumption per capita has
been growing at a sustainable rate of 0.5% in the last 40 years
and is expected to increase continuously. In 2008, total NPK
consumption was 165,496m. tonnes, a figure expected to
significantly grow in the next few years.
The expansion of grain
production in Brazil towards new frontier zones with poorer
soil conditions supports the maintenance of strong growth rates
for fertilisers sales in Brazil, underlined Lopez.
Even though the fertiliser sector
has suffered from the appreciation of the Brazilian real
against the US dollar, which hiked phosphate fertiliser prices
on occasion by more than 50% impacting domestic farmers hard
(see Table: Prices evolution of imported fertiliser
minerals & fertilisers), the sector is seen as one of
the most promising in Brazil in terms of developments.
Agribusiness exports 2008:
$71,800m.; 182 countries
*Aladi: Latin American Integration Association.
Mercosur: Southern Common Market, which includes Argentina,
Brazil, Paraguay and Uruguay.
The Ministrys plans
We are big consumers of
fertilisers and import 60% of our domestic demand. This is very
uncomfortable for the country. As one of the biggest food
producers in the world, the country cannot afford such
vulnerability. As Edison Lobão, Brazils
Minister of Mines and Energy, revealed to IM,
he is determined to push Brazil towards fertiliser
self-sufficiency by 2013.
Therefore, Lobo, who has
great expectations for Brazils potash and
phosphate resources, is carrying out a policy to get autonomy
in fertiliser production for Brazil in the next four years.
At present, Brazil is the
worlds sixth largest phosphate rock producer (see
below), but the country hopes to increase its phosphate
production by developing unexploited resources. For that to
happen, the Ministry started a three-year campaign to estimate
its phosphate resources in August 2008 which should be complete
by August 2010.
According to Lobo, the
country also plans to use the resources of Brazilian companies
exploiting phosphate in South America, such as mining giant
Vale SA, which has phosphate projects in Argentina and Peru
(IM 8 September 2008: Vale begins 3.9m. tpa Peru phosphate
We are making a domestic
effort but Brazilian companies are also doing their part abroad
in order to guarantee the supply of fertiliser in our
agriculture sector, Lobão said.
However, Eduardo Daher, executive
director of Brazilian fertiliser association ANDA, remains
cautious, pointing out the lack of sulphur in Brazil (see
The sulphur issue). I do not have the feeling that
we can be self-sufficient in a short term, he told
Brazilian grain production,
area & consumption 1992-2008
Phosphate is one of the segments in
Brazil that depends least on imports since Brazil ranks
6th for phosphate production (4.2% world production)
after China (25%), the USA (21%) and Morocco (20%) (IM
December 2009: Phosphate face-off).
In 2007, the country produced
6,185m. tonnes of phosphate rock in 2007 and owns about 319m.
tonnes reserves of the ore, mainly located in Minas Gerais
(67%), Gois (14%) and So Paulo (6%).
However, it is not seen as enough
for Brazil, which is a major food and biofuel producer and as a
consequence a huge fertiliser consumer. Therefore, the country
plans to consequently boost its phosphate production in order
to become fertiliser self-sufficient by 2013.
Edison Lobão, Brazils
minister of mines and energy, revealed to IM that he wants the
country to become fertiliser self-sufficient by 2013 (see
In 2008, about 46% of Brazils
total phosphate-based fertiliser supply (excluding inventories)
was met through imports.
Brazil also has a high dependence
on sulphur imports, sulphur being the basic raw material used
in the production of sulphuric acid, an intermediate raw
material used in the production of basic phosphate-based
Prices evolution of
imported fertiliser minerals & fertilisers (2003-2008,
SSP: single superphosphate; TSP: Triple Super Phosphate;
DAP: diammonium phosphate; KCL: potassium chloride; Urea:
Source: CPRM, MDIC
Fosfertil increases production
Fertilizantes Fosfatados SA is the
leading supplier of raw materials for the fertiliser industry
(78%) and of inputs for chemical companies (19%). The company
operates mines, and processing plants, in So Paulo,
Paran, Gois and Minas Gerais, in the centre and the
south of the country.
Fosfertil production capacity of
phosphoric acid is 0.8m. tpa (1.5m. MAP Equivalent) and its
production capacity of rock phosphate is 3m. tpa.
As explained Vital Jorge Lopes, Fosfertils chief
executive officer, the companys growth strategy is
aligned with government strategies focused on the production of
high-concentration phosphates, aiming at partially replacing
Lopez revealed to
IM that over the next five years, Fosfertil
intends to increase its production capacity of phosphoric acid
to 1.6m. tpa, and its production capacity of high concentration
phosphates by 65%, to 3.3m. tonnes. About 230,000 tonnes of the
production increase of phosphoric acid is expected to come from
the expansion of the brownfield of Uberaba (Minas Gerais),
scheduled to begin operations in 2011. The other 560,000 tonnes
are likely to come from the Projeto Salitre
greenfield, where the estimate operations is planned for
Brazilian phosphate rock
production by company (2007)
Anglo Americans phosphate on sale
Global mining group Anglo American
Plc - Base Metals is the second leading fertiliser manufacturer
after Fosfertil in Brazil with a production of about 982,000
tonnes in 2008. It has a controlling interest in Copebrás,
a leading Brazilian producer of phosphate fertilisers and
Anglo American announced in October
2009 that it intends to sell its phosphate fertiliser assets in
Brazil. After Anglo American rejected the proposal of its rival
Xstrata Plc in June last year to consider a merger between the
two companies, market analysts are pointing their fingers at
new suitors (IM 23 June 09: Anglo rejects
There is speculation that Brazil
Vale SA, the worlds second largest miner with kaolin
operations (IM July 09: Kaolin: Amazon to
Antwerp) and potash assets, may be eyeing the phosphate
assets of Anglo. Both companies declined to comment. We
have not put any deadline, Anglo American said to
IM, which intends to sell its Brazilian asset
at the most appropriate time, meaning when the
market will have recovered.
However, it would seem a logical
move for Vale which intends to develop its phosphate assets in
South America, and in relation to the minister Edison
Lobos policy to make Brazil fertiliser
self-sufficient within the next few years.
Evolution of phosphate rock
production in Brazil since 1996 (m. tonnes)
Source: DNPM, ANDA
Unexploited potash resources
Brazil ranks at the 7th
and 9th position for world reserves and production
of potash, respectively. According to the DNPM, an arm of the
Ministry of Mines and Energy, Brazil produced 471,000 tonnes of
potash in 2007, a small figure in comparison to Canada and
Russia which are the two world leading producers.
Vale is the only potash producer in
Brazil and has operated its mine since 1992 at
Taquari-Vassouras, in the state of Sergipe, which has a
capacity of 850,000 tpa. According to the DNPM, Sergipe has
estimated resources of 494.2m. tonnes of potash (9.7%
However, because of the economic
downturn, the Brazilian mining giants potash production
fell from 671,000 tonnes in 2007 to 607,000 tonnes in 2008,
representing a 9.6% decrease.
Nevertheless, Vale told
IM that it does have large growth
potential deriving from a rich project pipeline with its
operations on Peru and Argentina, in addition to a new
Brazilian mine in Carnalita, near Taquari-Vassouras.
Brazil, and in particular the
Amazon Basin, is also regarded by many as the worlds
greatest untapped source of natural resources. Today, junior
potash companies such as Amazon Potash Co. are using historic
exploration data for potash exploration.
Actual production from this area is
expected in the next two to four years and despite the recent
downturn in the potash market Ð a correction of sky high
fertiliser prices in 2008 sparked by the economic crisis Ð
medium and long term demand is set to be strong as the mineral
has no natural or synthetic substitutes.
Reinaldo Brito, head of the
department of mineral resources of CPRM (Geological survey of
Brazil), confirmed to IM that the Amazon Basin owns huge potash
resources. According to the DNPM, the official reserves
(measured + indicated) of silvinite in Fazendinha and Arari,
region of Nova Olinda do Norte in the state of Amazon, amounts
1,008m. tonnes, with an average 18.8% of K2O.
This could come as good news as
potash demand is increasing in Brazil, notably because of sugar
cane. We need more potash than any other country,
affirmed Eduardo Daher from ANDA to IM. But
even though a few companies have shown an interest in the
Amazonian deposits, obvious environmental and technical issues
might challenge any exploitation in the near future.
industrial minerals production and reserves (2007)
n.a. not available
||24.8m. (297,000 non-met)
The sulphur issue
Brazils race to reach
fertiliser self-sufficiency in four years could be slowed by
one matter. The country indeed has a high dependence on sulphur
imports, sulphur being through sulphuric acid a key element in
the process to transform phosphate rock into phosphate
In Brazil, sulphur can be found in
deposits in the Sergipe sediment basin, near Siriri city in
Castanhal. But the country only produced a tiny 480 tonnes of
sulphur in 2007 according to the DNPM. As a consequence, it is
mainly imported from Vancouver in Canada and Russia.
Brazil almost does not
produce sulphur and has to import from abroad, Daher
explained to IM.
It will be an issue in the
future for the countrys plans to become self-sufficient
in the production of fertilisers, he forecasted.
However, a few new projects are on
the way to produce sulphur as a by-product. Brazilian oil
producer Petrleo Brasileiro SA (Petrobras) intends to
expend its production by 2014, reducing the sulphur content in
the gasoline and diesel to 50ppm. Votorantim Metals intends to
expand its nickel production to 17,000 tpa at Mineracao Serra
de Fortaleza, therefore increasing its sulphur output.
Brazil is seen as a blossoming
field of opportunities for investors in the mining industry.
Firstly, because it is relatively politically and economically
stable, and secondly, owing to its diversity of resources,
products and markets in addition to a developed agritechnology
and agroenergy knowledge (eg. the ethanol fuel experience since
However, the country still has to
face a few challenges before being able to develop its industry
at maximum capacity.
Brazil has a lot to do but
infrastructure is still an issue, Livio Togni, operations
director of refractories group Togni SA Materiais
Refratorios, explained to IM.
As an example, if the crisis had
not happened, analysts report that Brazil would have more than
doubled its steel production by 2015 to 80m. tonnes from the
33.8m. tonnes produced in 2007. In theory But it was without
counting on Brazils main weakness which continues to curb
its race to development. In that case, we would have been
stopped by the lack of roads and infrastructure, regrets
In Brazil, infrastructure can
indeed be a major problem, more or less important depending on
the area. As Vale underlined to IM,
sustaining mining activities in the Amazon region
requires special management skills, in which problems go from
poor infrastructure to the difficulties in finding qualified
Therefore, it is sometimes more
challenging to supply the domestic market compared to the
Shipping the product in the
country can sometimes be more difficult than exporting it,
notably when kaolin is sent 3,000km away to São
Paulo in the south of the country on trucks. It is logistically
complex, said David Holt, global business development
manager, Imerys Minerals Ltd, UK.
Concerns have arisen in the mining
industry that Brazils power infrastructure may not be
adequate to reliably serve its mushrooming commodity-based
economy. A power outage plunged as many as 60m. people and 16
of Brazils 27 states and part of Paraguay into darkness
on 10 November 2009.
Transmission problems at a power
substation in Parana state in the south of the country
apparently caused a disruption at the Itaipu dam, one of the
worlds largest operating hydroelectric plants which
generates 19.3% of Brazils electricity. Commodity-based
companies including Vale and Petrobras had to suspend their
operations because of a lack of electricity.
According to Edison Lobão,
adverse weather conditions caused three transmission lines to
collapse, triggering a domino effect that caused the Itaipu dam
to go offline. President Lula da Silva insisted the blackout
was an isolated incident that had nothing to do with a lack of
investment in the energy sector.
The industry remains confident,
though cautious. Power is fragile in Brazil but it will
not be a problem to develop the mining industry, said
Togni, adding that the main challenge was in fact to
distribute the energy.
Amid signs of an economy getting
stronger, the Brazilian currency became a source of concern as
the R$ is now described as too strong compared to the
US$. As Togni explained, it is very good to import
raw material but it is a problem to export.
After having suffered the effects
of the global downturn, Brazil seems to be on the path of
health. This recovery may not be homogeneous and depends on the
Recovery will take some
time, believes Livio Togni who forecasted a
flat year for 2010, stable but in very low
capacity, followed by recovery at the beginning of 2011
before facing a firm recover.
The cement market may lead the way
to better days, as it is expected to continue its steady growth
in Brazil, far before Europe and the USA, more heavily impacted
by the crisis. The perspective of the 2016 Olympic Games and
the 2014 FIFA Football World Cup in addition to the government
plans for construction will certainly boost the growth.
Brazil is expected to go
through a sustained growth phase in the next few years, as the
country has demonstrated political and economical stability,
along with a responsible management of public finances,
Holcim told IM. Therefore, this attitude is
seen as an encouragement to new investments.
The long-term outlook for
fertiliser demand is also promising, considering the prospects
for both food consumption and biofuel use. Brazilian
Agribusiness Consultants estimate a long-term growth rate of
between 3.1% and 4.1% for fertiliser sales in Brazil, which is
in line with estimates of the long-term growth rate for the
countrys GDP, 4.5%. More than half of this growth
is expected to come from the expansion of the planted area
(which is well balanced between soybean/corn and sugar cane)
and the other half from the increasing use of fertiliser per
hectare in Brazil, said Lopez from Fosfertil. The MAPITO
region (Maranhao, Piaui and Tocantins) as well as the west of
Bahia are the areas in Brazil where grain production is
expected to expand in the coming years.
Therefore, if Brazil can resolve its infrastructure issues
which have been until now one of the major concerns, growth is
expected to continue, reaching a full recovery around 2011.
We have some job to do in order to prepare Brazil for the
future, concluded Silvio Togni.
Brazil at a glance
President: Luiz Inácio
Lula da Silva
Minister of Mines and Energy: Edison
(see interview on p. 33)
Population: 194m. (5th after
China, India, the USA and Indonesia)
Area: 8.5m. km2 (worlds
5th biggest country, 50% of South America)
Largest city: São
Currency: Brazilian real (R$1.7 ~ $1)
GDP: $1.61 trillion (2008)
Coffee: 1st producer/1st exporter; Sugar:
1st producer/1st exporter; Orange
juice: 1st producer/1st exporter;
meat: 1st producer/1st exporter;
soya complex: 2nd producer/1st
exporter; Poultry: 2nd producer/1st
exporter; Cotton: 6th producer/3rd
Fertilisers: 4th worlds
market; 3rd imports market
Consumption: 165,496m. tonnes NPK
Phosphate rock: 6th producer
Ceramic tiles: 3rd producer
Cement: 8th producer
Steel: 8th producer
- Oil: 14th producer (2.3% of
world production); 16th for proven reserves
We are waking
Brazils Minister of Mines and Energy, talked to IM about
his plans to develop Brazils mineral assets, which
includes a new Mining Law
The policy is to become self-sufficient in
production in Brazil in the next four years, Edison
Brazils Minister of Mines and Energy.
Courtesy Francisco Stuckert/MME
IM: How would you describe the mining industry in
EL: We are great
exporters and producers of minerals, with big reserves of iron,
uranium and other minerals. We are in a boom of development in
Brazil and the challenge is to produce minerals for consumption
but also to export as well. Despite not developing in the race
like China, we are doing our best to keep the same pace.
IM: Where do you export
EL: We have a
strong trading relationship with South America and the Mercosul
countries [Argentina, Brazil, Paraguay and Uruguay] in addition
to a very tight relationship with Arabian countries and Africa.
They are an already open opportunity for Brazil. A present, we
are sort of waking up for this general and very big
IM: What are the plans for
Brazils fertiliser market?
EL: We are the
biggest food producer in the world [see Brazil at a
glance]. For that reason, we are importers and big
consumers of fertilisers, importing 60% of our domestic demand,
which is very uncomfortable for the country. We cannot have
Therefore, the policy that we are
carrying out now is to become self-sufficient in fertiliser
production in Brazil in the next four years.
IM: How will you achieve
EL: We have great
expectations and resources for phosphate and potash. Therefore,
the Brazilian government is making a big effort in order to
assure our self-sufficiency in fertilisers.
We have strong competition from
Argentina which has big phosphate plants, including a project
with Vale. Vale also has projects in Peru [IM 23 November
2009: Phosphate rival for Vale in Peru]. The company has
found big resources over there and is developing them at the
moment. Colombia is also a big competitor.
The project is to develop our own
resources and these from the Brazilian companies in South
America for the Brazilian market. The Brazilian companies are
doing their part abroad in order to guaranty the supply of
fertiliser in our agriculture sector.
IM: You are working on a
new mining law?
EL: The law that
regulates the sector is the mining code. Now, we are working on
a new set of laws to modernise the sector in order to improve
the old laws and bring a more modern and feasible environment
for the sector.
IM: In what
EL: The old mine
laws allowed people to keep their mining rights almost for ever
with no responsibility for the state. The rules were not very
tight in order to oblige people to put their mining rights into
opportunities to get into production rapidly.
Now, with the new law, you will
have a short period of time to production. Otherwise, you lose
For exploration rights, the
deadline between the licence award and the time to use the
opportunity to start exploration will be five years, instead of
the previous indefinite time. The limit for mining rights will
be 35 years.
IM: What happens after
EL: The government
will withdraw the licence because the underground resources
belong to the country and the population. The old code does not
IM: When will this law be
EL: The law will
be sent to the parliament at the end of this year . We
estimate that it will take one year to discuss about it and to
approve the law. We expect it to be enforced in one year, at
the end of 2010 or beginning of 2011.
IM: What has been the
EL: We have
organised consultations with associations, syndicates of
producers, mining companies, exploration companies etc. and had
a very warm and welcome reception. The idea is to defend
national interests in addition to not jeopardise any individual
interests [see New Mining Law: impact on the
IM: What do you think of
EL: China is not a mineral exporter. It is
a consumer, an importer. So our commerce with them is in one
way: to feed them. But even though they produce some
industrialised products related to the mineral industry, we
produce different minerals so our trade is going to be
New Mining Law: industry reaction
Some in the Brazilian mining
industry have pointed out a few issues that may arise when this
new law is enforced.
First, a trading market for
mining rights could appear, people holding their rights
until the expiration date in order to get funds.
Second, the main concern is that it
will disturb the development of long term projects.
As Silvio Togni, operations
director of refractories group Togni SA put to
IM: If you have planned to start
exploration in ten years but have the rights for five years,
what will happen after that?
What will happen if you know
you will need the resources in a few years but are not ready
yet to develop the project? he added.
We have a good law at present which gives us the
possibility to plan for the future. I hope the government will
take these concerns into consideration, said Togni.