With a Little Help from China Mining Goes On Unchanged in Brazil

    Brazil's mining

    Brazil's mining In spite of the world crisis, Brazil’s mining sector, which answered to 48% of the Brazilian trade balance result in 2008 – having contributed US$ 12 billion out of a total of US$ 24.7 billion – has maintained its investment plan of US$ 57 billion.

    The initial forecast was for investment to be carried out within a period of five years, that is, between 2008 and 2012. However, the decrease in international demand and falling prices of ores, a trend that started in October last year, have extended the time period during which the investment should take place.

    “The change in deadline should depend on the strategy of companies. Many of them are rearranging their investment. None of them has managed to do it yet. That is so because most of the funds are insured from vantage point of credit,” said the president of the Brazilian Mining Institute (Ibram), Paulo Camillo Penna.

    “The economic plans issued from July last year onwards in Europe, the United States and China should only mature as of March or April this year. Only then will we have a clearer view of what will happen, and will we be able to estimate by how much that deadline is going to be extended,” he stated.

    According to Penna, there are alarmist predictions speaking of plummeting sales in the segment. More on the optimistic side, he remembers that nearly all companies in the sector have implemented shutdown periods and benefited from the unstable times to carry out in-company maintenance, thus avoiding unemployment and greater losses.

    “We can already see signs of improvement, but we are living in a time of volatility. The market goes up on one day and down on the next. But we are certain that there should be a gradual resumption starting in March and April,” he bet.

    Of total investment in the sector, 40% went to the state of Pará, 30% to Minas Gerais and the remaining 30% across the rest of Brazil. Pará, for instance, should invest in projects in the fields of iron ore, bauxite, kaolin, copper, nickel, logistics and electric power generation.

    Penna also stated that only 30% of the Brazilian territory underwent thorough geological surveys and had its mineral wealth identified, which, according to him, “is a clear sign that there are new reserves in Brazil, therefore we must seek to establish partnerships and joint ventures with international investors who are able to develop mining in the country,” he said.

    The Arab countries were cited as potential partners for the country in this segment.

    “The Brazilian diplomacy is making an effort so as to encourage trade between Brazil and the North African and Middle Eastern countries. There is also, on the part of the companies, an interest in offering partnership opportunities to the region,” he said.

    China’s Role 

    Penna also underscored the important role played by China in production and purchase of ores. “A project of the Chinese government provides for US$ 740 billion to be invested in infrastructure, and that will create a demand for ores still this year,” he said.

    Besides, given the increasing migratory flow from rural to urban areas in China, within the next 20 years, approximately 800 million Chinese people are expected to migrate to the cities.

    Last year, the UN announced that the urban population has equaled the rural population. “There is a worldwide urbanization process that calls for the use of ores. In the medium run, we consider that as a guarantee that the sector will resume its growth,” he asserted.

    According to him, measures adopted by the federal government in the civil construction and automobile industries are contributing to minimize the effects of the crisis. “The role of the Growth Acceleration Program (PAC) is very import, as it favors important segments of the industry and also the production of ores such as aluminum, iron, copper, limestone and manganese,” he said.

    According to Penna, the sector will continue working and investing for Brazil to become self-sufficient in copper production by 2011. “Copper is a strategic ore, which will get greater attention and more funds,” he assured.

    According to figures supplied by the Ibram, the state of Pará alone should produce around 700,000 tons of copper a year as of 2012. The production volume should qualify Brazil as the eighth largest global producer of that ore, after Russia (with 730 tons a year).

    Copper is also gaining share in the global market, and answers to a generous portion of exports in the Legal Amazon. The copper exported from the Amazon region, mainly in the state of Pará, is turned to Germany, South Korea, Sweden, India and China, the leading consumer markets abroad.

    The Brazilian mineral output was equivalent to 54 billion reais (US$ 23.5 billion) in 2008 – growth of 17% compared with 2007, when the production equaled 46 billion reais (US$ 20 billion), oil and gas not included. The highlight was iron ore production, which grew by more than 16% in production volume.

    According to figures supplied by the Ibram, considering the mining and ore processing industries, the value of Brazilian mineral production rises to 152 billion reais (US$ 66.1 billion), a figure 13% higher than in 2007, when the total was 134 billion reais (US$ 58 billion).

    The main producer states in 2008 were Minas Gerais (53.90%), Pará (24.69%), Goiás (5.85%), São Paulo (2.77%), Bahia (2.20%), Sergipe (1.57%) and others (9.02%).

    In 2009, according to estimates by the institute, significant growth is expected in production of aluminum (bauxite), copper, nickel, iron and phosphates, with the start of operation of new projects and expansion of others.

    The ore mining industry maintained a prominent position in the generation of added value in 2008, with growth of 12% when compared to the previous year. Last year, the mining and transformation industry contributed with around US$ 77 billion, or approximately 5.76% of the total gross domestic product (GDP) of Brazil.

    The balance estimated for the mining sector – primary goods, untransformed, excluding oil and gas, reached US$ 12 billion in 2008. Considering partly manufactured goods, manufactured goods and chemical compounds, the mining and transformation industry posted a result of US$ 20 billion, representing 71% of the Brazilian trade balance surplus.

    Anba

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