Brazil

There is a close linkage between emerging markets and commodity prices. This connection becomes stronger for net commodity exporters. The two most notable examples are Russia and Brazil, both of which are commodity and energy exporters. These two countries have been two of the hardest hit among emerging markets.

Russia market vectors (Black). Brazil iShares (Orange)

Russian market vectors (Black). Brazilian iShares (Orange) since 2012. MetalMiner analysis with data from Stockcharts.com.

These markets have historically moved with commodity prices. When commodities fall, exporters of commodities make less money which is bad for their economy. In many cases, the movement of these markets helps to give clues to future moves in commodities.

Free Download: MetalMiner’s Top Service Centers Guide

As we can see in the chart above, Russian (in black) and Brazilian (in orange) stock markets have been in bearish mode since 2011. Both, however, rallied this year but we can see that the rally is falling short of their previous peaks. The recent drop also coincided with falling commodity prices worldwide since April.

What This Mean For Metal Buyers

Weakness in emerging markets validates weakness in commodity prices. The dollar is still strong while commodities and emerging markets fall. It’s hard to become bullish on commodities until we start seeing some divergences.

FREE Download: Last Week for the May MMI® Report.

{ 0 comments }

Along with steel, aluminum was once one of South America’s major growth products and the source of considerable pride for several Latin American countries.

Rapid Decline

But for a variety of reasons, the decline in aluminum output has been rapid and dramatic. A recent Reuters article states that according to International Aluminum Institute numbers, February’s regional run-rate was the equivalent to 1.33 million metric tons per year. A year ago it was 1.80 million. At its peak in 2008, it was 2.70 million tons. South America was once a major exporter of metal to world markets.

Free Download: Cut Your Aluminum Shipping Costs

In 1994 Brazil was the third-largest and Venezuela the fourth-largest source of aluminum imports into the United States. Now, both countries import. We recently wrote about the state of the Venezuelan aluminum sector. Chronic underinvestment due to the gradual bankrupting of the once-buoyant Venezuelan economy has left the country’s two smelters a shadow of their former selves.

Venalum had a nominal capacity of 430,000 mt per year but production last year declined to just 110,000 mt and the company has warned customers it can’t even meet internationally expected purity norms for standard P1020 grade. Alcasa, the other plant with a headline capacity of 170,000 mt, is only producing about 29,000 mt.

{ 0 comments }

Spring has sprung here at MetalCrawler and beleaguered commodity markets are hoping for a renewal themselves as steel production is predicted to fall in Japan, the once-mighty aluminum industry in Brazil faces another shutdown and new shipment rules could cause even larger back-ups in transportation of North Dakota oil.

New Oil Shipment Rules

Following a spate of explosive accidents involving North Dakota crude oil, the state on Wednesday began requiring companies to remove certain liquids and gases from oil before it’s loaded onto rail cars, a move industry and state regulators believe will make for safer shipments.

Free Download: Cost Certainty for Overseas Oil Shipments

The rules, developed over the past year, require all crude from the oil patch to be treated by heat or by pressure to reduce its volatility before being loaded onto train cars. The new rules require North Dakota crude to have vapor pressure below 13.7 pounds per square inch, which is less than the 14.7 psi threshold national standard recognized as stable. Winter-blend gasoline that contains 10% ethanol is rated at 13.5 psi.Industry officials initially balked at the regulations, saying the state’s crude was being unfairly singled out and the new standards would slow production and increase costs.

Japanese Steel Production Falls to 6-Year Low

Japan’s crude steel output for April-June is forecast to drop 7.8 percent from a year earlier to the lowest for the quarter in six years, the Ministry of Economy, Trade and Industry (METI) said on Thursday.

The fall would mark the latest in a series of signs of economic slowdown, clouding the outlook for Prime Minister Shinzo Abe’s drive to reflate the economy and spurring calls for more monetary stimulus.

South American Aluminum Production Wanes

US aluminum producer Alcoa announced this week the full shuttering of its Alumar smelter in Brazil.

Alcoa and minority partner BHP Billiton curtailed two potlines at the 440,000-metric-tons-per-year plant over the course of 2013 and 2014. Now the third and last will also be mothballed.

It’s the fifth, and largest, Brazilian smelter to be shuttered since 2009 – a major retreat for what was once one of the world’s top producing countries.

Reuters’ Andy Home writes that’s it’s symptomatic of a broader decline in primary aluminum production in South America.

{ 0 comments }

Crude oil fell sharply again as the International Energy Agency (IEA) cut its forecast for global oil demand for the 5th time. The lack of demand has been attributed to weakening global conditions and increasing supplies, especially coming from the US shale revolution.

See why our Auto MMI® is a leading indicator: download the Monthly MMI® Report.

Crude oil is now at its lowest level since 2009, hurting anything tied to oil production. This can be reflected in the stock market of countries that export energy. The biggest foreign losers are Russia, Canada, and several oil-rich South American economies such as Brazil and Venezuela.

{ 0 comments }

Electricity Consumers in Brazil can negotiate with suppliers on their electricity contract price based on their knowledge of certain parameters of the industry. A clear understanding of their consumption pattern and knowledge about the supplier’s generation mix can give consumers an upper hand over suppliers during the final negotiation of contract prices.

FREE Download: The Monthly MMI® Report – covering the Aluminum market.

Although there are numerous strategies, with the changing dynamics of the markets these strategies need to be reevaluated in order to minimize the risk involved, especially in the procurement context. When the mitigation strategies looked from a conservative front can be divided into two broader verticals.

{ 0 comments }

Brazil is the 7th-largest producer of metal castings considering total global production in 2012. For 2013, it is estimated that the Brazil’s metal production to be 2.96 million metric tonnes. As an exporter, in 2012 Brazil catered about 8.5% of US metal castings demand. Since 2011, Brazil has dropped significantly as an exporter of castings to the US.
See why our Auto MMI® is a leading indicator: download the Monthly MMI® Report.

This is primarily due to the gain the in the Brazilian real against the dollar and the impact of higher energy cost in metal castings production.

{ 0 comments }

This section of an exclusive report from Beroe, Inc. goes into further detail about the effect of energy prices on aluminum smelting there.

FREE Download: The Monthly MMI® Report – covering the Aluminum market.

From a short term prospective (2-3 yrs.), it is anticipated that the Brazilian electricity sector won’t be able to implement diversification and the volatility in electricity prices will continue to prevail. Although from a long term prospective (5-10 yrs.) the prices will become more competitive with advent of fuel diversification in the coming years there-by giving industries an upper hand during energy/electricity procurement.

{ 0 comments }

Brazil is South America’s largest consumer market. Among the other emerging economies it is still considered as a bustling market with a lot of potential customers.

See why our Auto MMI® is a leading indicator: download the Monthly MMI® Report.

The Brazilian automotive industry is one of the fastest-growing automotive manufacturing markets in the world which accounts for almost 20% of the country’s GDP. Based on strong growth in the last few years, Brazil has now become the fourth-largest automotive market globally next to China, the USA and Japan.

{ 0 comments }

Brazil, once the darling of the natural resources sector, is looking sicker by the month. For two decades, the lure of high-quality bauxite and iron ore coupled with the expectation of low power costs from vast hydroelectric potential encouraged firms like Alcoa and Norsk Hydro to invest in alumina and aluminum smelters, and steel companies […]

{ 0 comments }

With Turkey’s account balance and Prime Minister Erdogan’s political career not looking so hot, and with Kirchner’s Argentina battling inflation, emerging markets don’t appear to be all that healthy at the moment. Brazil’s Cup Doesn’t Overfloweth Not helped by Argentina’s ills, neighboring Brazil has mounting problems too, which no amount of razzmatazz around the forthcoming […]

{ 0 comments }