Mineral industry numbers - 1st half of 2022 - Core Case

Mineral industry numbers – 1st half of 2022

The mineral industry numbers for the first half of 2022 show a drop in revenue and trade balance, as well as in production and exportation compared to the same period of 2021. 

On the other hand, importation of ore has been soaring compared to the first half of last year. The data was provided by the Brazilian Mining Institute (Ibram).

Shall we examine these figures closer?

Ore revenues: 24% drop

The Brazilian mineral industry recorded in the first half of 2022 a drop in exportations, which led to a 24% decline in revenues, reaching R$ 113.2 billion, compared to the R$ 149 billion in the same period last year.

This revenue represents a 52.5% drop in the trade balance of the 1st half of 2022, compared to the same period in 2021. 

Considering the quarterly figures, in the second quarter of this year, revenues were R$ 57 billion, slightly higher than the R$ 56.2 billion in the previous quarter.

Mineral industry production

Relative to the production of the mineral industry, the estimate was 441 million tons, representing an almost 9% drop relative to the first half of 2021, when production reached 483 Mt.

Iron ore, gold, copper and bauxite on the drop

In the first half of 2022, the iron, gold, copper and bauxite mineral commodities had an expressive drop in revenues, 36%, 15%, 3% and 3%, respectively. 

The iron ore, a commodity that represents over 70% of all external sales in the Brazilian mineral industry, had the highest drop in revenue, representing R$ 107.5 billion in the first half of 2021 dropping to R$ 68.3 billion in the first half of 2022. In the quarterly comparison, iron ore presented a slight recovery, increasing by 9%. 

Some mineral commodities recorded an increase in the amounts generated by exports in this period, such as niobium (9%) and kaolin (13%).

Exports to China and influence in the Brazilian market

China is the main buyer of Brazilian iron ore, responsible for 64.8% of exports of the product. According to Ibram, transactions with China involving this metal in the first half of 2022 dropped 32.3%.

Chinese demand for iron ore strongly impacts performance of the Brazilian mineral industry revenue. Therefore, this decrease in exports to the Asian country is the main factor responsible for mineral revenues in the first quarter of 2022.

Increase in mineral imports

With the drop in exports and in the Brazilian mineral revenue, imports increased substantially, which has also influenced the results of the trade balance. 

Purchases abroad represented US$ 9.4 billion, which represents an expressive 199.9% more than in the same period last year. Approximately 92% of these imports represent mineral coal for steel mill use and potassium for manufacturing fertilizers.

Mining and the market cyclic nature

According to the President Director of Ibram, Raul Jungmann, mining has a cyclic behavior and depends on the mood of the international market. 

Last year, for example, some industry records were set. According to Jungmann, in response to the virtuous performance last year, a speculative attack has been happening to mineral industry gains.

“I am referring to bills processed in Congress. Taking into account the improvement in production, increase in revenues and in exports in 2021, they seek to expand, practically duplicate royalties charged. We are now noticing the situation has been reversed. We are expecting to go back to the previous situation, but we have to consider the cyclical aspect”, he said.

Jungmann says the increase in the charge would result in the increase in the cost of mining activity and loss of competitiveness of the industry, which is productive and brings a lot of capital to the country. Jungmann also complained about the creation of the Mineral Resources Inspection Fee (TFRM), through state laws in Minas Gerais, Pará and Amapá. Challenged by the National Industry Confederation (CNI), the constitutionality of this fee is being examined by the Supreme Court (STF). Source: Agência Brasil).

Future perspectives for the Brazilian mineral industry

Therefore, the Brazilian mineral sector had a 24% drop in revenue in this first half of 2022, with a strong influence caused by the decline in iron ore exports (the main mineral commodity exported by Brazil) to China (top buyer).

According to an article by XP Expert, the perspectives for the mineral industry for this year can be summarized into the following main aspects:

“Purchases of iron ore by China are likely to go back to normal after the Winter Olympics, also driven by a cooling of the energy crisis that affected the country in the second half of 2021.

We foresee a small increase in the worldwide offer of the commodity (mostly driven by Vale), offset by an increase in the global demand for steel in countries out other than China (especially in the US and Europe, supported by government plans to up spending in infrastructure). In our models, we have assumed a conservative iron ore curve, with the commodity trading at an average US$100/t in 2022.”





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