2014-01-07 21:19:01 - New Materials market report from Business Monitor International: "Brazil Metals Report Q1 2014"
Metals consumption growth in Brazil will be driven by the automotives, construction and infrastructure sectors as spending on fixed asset investment under Brazil's Growth Acceleration Programme accelerates into 2014. We note, however, that persistent delays are likely to lead to consumption weakness in the short term. More broadly, we foresee metals demand growth on the back of our forecast for 3.2% economic growth on average per annum from 2014 to 2017, with growth accelerating over the period.
Consumption To Exceed Production
We believe metals demand will grow, though there are various risks in the short term. After a disappointing 2012 and continued disappointing data into 2013, in which overall economic growth slowed and fixed asset investment stalled, we see activity picking up
in 2014. However, while we believe government fiscal stimulus policies, namely tax cuts and spending, are likely to continue, we think such efforts will be more limited than in the past given persistent inflation and deteriorating fiscal dynamics.
Full Report Details at
We forecast inflation will average 6.2% through the end of 2013, though we expect it to ease to 5.7% in 2014. Persistent inflation has the downside risk of limiting private consumption. Furthermore, infrastructure projects still face various delays, which presents a downside risk to our metals consumption and production forecasts in 2014. Still, construction and infrastructure industry growth should remain solid, averaging 4.2% and 4.7%, respectively, from 2014 to 2017. Although automotive production will not rise as quickly, we still forecast production to grow an average of 3.5% a year during our forecast period.
Brazil will consume increasingly more of its domestically produced metals given these trends, providing an opportunity for companies to increase revenues and profits in the domestic market. Production growth will not match consumption growth, although we still forecast expansion. Firms will remain constrained by Brazil's tax and regulatory environment, adding to production costs and lowering margins. Lower import duties on certain metal products, after higher rates in previous years, will also weigh on domestic producers.
Persistently high electricity costs remain problematic as well, leading aluminium producers especially vulnerable given the metal's energy-intensity during production. However, government measures have led to lower electricity costs, namely by reducing tariffs on electricity, which should help producers. Still, electricity access and power disruptions remain a threat. Currently, the country is using imported natural gas to power Brazil's gas-fired power plants, though it remains comparatively expensive.
Report Table of Contents:
BMI Industry View
- Consumption To Exceed Production
- Metals SWOT
- Industry Forecast
- Steel: Consumption And Production To Grow At Moderate Pace
- Consumption: Short-Term Weakness
- Production: More Pain Before Recovery
- Real Relief For Exporters
- Table: Brazil - Crude Steel Production, Consumption And Growth, ('000 tonnes)
- Table: Brazil - Steel Industry Historical Data, 2003-2012 ('000 tonnes, unless stated otherwise)
- Aluminium: Cheaper Electricity To Spur Production
- Electricity Prices Will Remain An Issue
- Strong Growth In Consumption
- Table: Brazil - Aluminium Consumption And Production, ('000 tonnes)
- Copper: Consumption Growth To Outpace Production
- Production Growth To Continue
- Table: Brazil - Copper Consumption And Production ('000 tonnes)
- Tax Regime
- Corruption Remains Vexing
- Table: Brazil - Political Overview
- Table: BMI Steel Forecast
- Table: Steel Forecast
- Commodity Strategy
- Iron Ore: Prices To Head Lower In 2014
- Steel: Reprieve Unlikely To Last
- Aluminium: Weakness Resuming
- Copper: Continued Weakening
- Lead: Modest Secular Uptrend To Remain Intact
- Nickel: Can't Catch A Break
- Tin: Outperformance To Continue
- Zinc: Likely To Hold Up
- Table: Select Commodities - Performance & BMI Forecasts
- Table: BMI Commodities Strategy
- Table: Financial Data For Key Metals Firms Listed In Brazil, FY2012
- Energy Costs Affect Aluminium And Steel
- Latest Financial Results
- Table: Gerdau - Key Financial Data
- Cia Siderurgica Nacional
- Recent Financial Performance
- Table: CSN - Key Financial Data
- Vale - Q1 2014
- Company Overview
- Company Strategy
- Recent Financial News
- Company Details
- Table: Vale - Key Financial Data
- Cross Checks
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