Brazil 2011 Mining - BMI

8/6/2019 Brazil 2011 Mining - BMI

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Brazil - Metals & Mining 0076 - 2106 - 2009

Datamonitor. This profile is a licensed product and is not to be photocopied Page 1

INDUSTRY PROFILE

Metals & Mining in

Brazil

Reference Code: 0076-2106

Publication Date: August 2010


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EXECUTIVE SUMMARY



EXECUTIVE SUMMARY

Market value

The Brazilian metals & mining industry shrank by 39.7% in 2009 to reach a value of $36,800.7 million.

Market value forecast

In 2014, the Brazilian metals & mining industry is forecast to have a value of $60,459.2 million, an

increase of 64.3% since 2009.

Market segmentation I

Iron & Steel is the largest segment of the metals & mining industry in Brazil, accounting for 77.1% of the

industry's total value.

Market segmentation II

Brazil accounts for 13.8% of the Americas metals & mining industry value.

Market rivalry

The metals and mining industry was greatly affected by a global drop in commodity prices in 2009 which

caused a sharp decline in many markets.


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CONTENTS



TABLE OF CONTENTS

EXECUTIVE SUMMARY 2

MARKET OVERVIEW 6

Market definition 6

Research highlights 7

Market analysis 8

MARKET VALUE 9

MARKET SEGMENTATION I 10

MARKET SEGMENTATION II 11

COMPETITIVE LANDSCAPE 12

LEADING COMPANIES 15

BHP Billiton Group 15

Gerdau S.A. 20

Vale S.A. 25

MARKET FORECASTS 31

Market value forecast 31

MACROECONOMIC INDICATORS 32

APPENDIX 34

Methodology 34

Industry associations 35

Related Datamonitor research 35

Disclaimer 36

ABOUT DATAMONITOR 37

Premium Reports 37

Summary Reports 37

Datamonitor consulting 37


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CONTENTS



LIST OF TABLES

Table 1: Brazil metals & mining industry value: $ million, 200509 9

Table 2: Brazil metals & mining industry segmentation I:% share, by value, 2009 10

Table 3: Brazil metals & mining industry segmentation II: % share, by value, 2009 11

Table 4: BHP Billiton Group: key facts 15

Table 5: BHP Billiton Group: key financials ($) 17

Table 6: BHP Billiton Group: key financial ratios 18

Table 7: Gerdau S.A.: key facts 20

Table 8: Gerdau S.A.: key financials ($) 23

Table 9: Gerdau S.A.: key financials (BRL) 23

Table 10:

Gerdau S.A.: key financial ratios 23

Table 11: Vale S.A.: key facts 25

Table 12: Vale S.A.: key financials ($) 28

Table 13: Vale S.A.: key financials (BRL) 28

Table 14: Vale S.A.: key financial ratios 29

Table 15: Brazil metals & mining industry value forecast: $ million, 200914 31

Table 16: Brazil size of population (million), 200509 32

Table 17: Brazil GDP (constant 2000 prices, $ billion), 200509 32

Table 18: Brazil GDP (current prices, $ billion), 200509 32

Table 19: Brazil inflation, 200509 33

Table 20: Brazil consumer price index (absolute), 200509 33

Table 21: Brazil exchange rate, 200509 33


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CONTENTS



LIST OF FIGURES

Figure 1: Brazil metals & mining industry value: $ million, 200509 9

Figure 2: Brazil metals & mining industry segmentation I:% share, by value, 2009 10

Figure 3: Brazil metals & mining industry segmentation II: % share, by value, 2009 11

Figure 4: BHP Billiton Group: revenues & profitability 18

Figure 5: BHP Billiton Group: assets & liabilities 19

Figure 6: Gerdau S.A.: revenues & profitability 24

Figure 7: Gerdau S.A.: assets & liabilities 24

Figure 8: Vale S.A.: revenues & profitability 29

Figure 9: Vale S.A.: assets & liabilities 30

Figure 10:

Brazil metals & mining industry value forecast: $ million, 200914 31


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MARKET OVERVIEW



MARKET OVERVIEW

Market definition

The metals & mining industry consists of the aluminum, iron & steel, precious metals & minerals, coal andbase metal markets.

In the aluminum market, only production of primary aluminum is considered. Recycled aluminum is not

included within this report. The market is valued at manufacturer's selling price (MSP).

The base metals market consists of lead, zinc, copper, nickel and tin. The market has been valued as

total primary metal production at annual average prices.

The coal market consists of just primary coal (anthracite, bituminous and lignite). Secondary coal

(metallurgical coke, anthracite and bituminous briquets, and lignite briquets) is not included in this report.

The market has been valued as total mine production at annual average minemouth prices and does not

include any transportation costs.

The iron & steel market consists of the production of crude steel, blast furnace (pig) iron and direct

reduced iron. Market values have been calculated using annual average steel and iron prices.

The precious metals & minerals market includes gold, silver, platinum, palladium, rhodium and industrial

and gem-quality diamonds. The market is valued using total annual mining production volumes and

annual average prices.

For the purposes of this report, the Americas consists of North America and South America.

North America consists of Canada, Mexico, and the United States.

South America comprises Argentina, Brazil, Chile, Colombia, and Venezuela.


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MARKET OVERVIEW



Research highlights

The Brazilian metals & mining market had total revenue of $36.8 billion in 2009, representing a compound

annual rate of change (CARC) of -0.8% for the period spanning 2005-2009.

Iron & steel sales proved the most lucrative for the Brazilian metals & mining market in 2009, with total

revenues of $28.4 billion, equivalent to 77.1% of the market's overall value.

The performance of the market is forecast to accelerate, with an anticipated compound annual growth

rate (CAGR) of 10.4% for the five-year period 2009-2014, which is expected to drive the market to a value

of $60.5 billion by the end of 2014.


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MARKET OVERVIEW



Market analysis

The Brazilian metals & mining market experienced strong growth until 2009 when it fell into a steep

decline. Recovery to very strong growth is expected in 2010. The market is then expected decelerate

throughout the forecast period, experiencing only moderate growth from 2013.

The Brazilian metals & mining market had total revenue of $36.8 billion in 2009, representing a compound

annual rate of change (CARC) of -0.8% for the period spanning 2005-2009. In comparison, the US and

Canadian markets declined with CARCs of -2.4% and -0.3% respectively, over the same period, to reach

respective values of $124.3 billion and $30.6 billion in 2009.

Iron & steel sales proved the most lucrative for the Brazilian metals & mining market in 2009, with total

revenues of $28.4 billion, equivalent to 77.1% of the market's overall value. In comparison, sales of

aluminum generated revenues of $3.6 billion in 2009, equating to 9.7% of the market's aggregate

revenues.

The performance of the market is forecast to accelerate, with an anticipated compound annual growthrate (CAGR) of 10.4% for the five-year period 2009-2014, which is expected to drive the market to a value

of $60.5 billion by the end of 2014. Comparatively, the US and Canadian markets will grow with CAGRs

of 8% and 12.3% respectively, over the same period, to reach respective values of $182.5 billion and

$54.6 billion in 2014.


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MARKET VALUE



MARKET VALUE

The Brazilian metals & mining industry shrank by 39.7% in 2009 to reach a value of $36,800.7 million.

The compound annual rate of change of the industry in the period 200509 was -0.8%.

Table 1: Brazil metals & mining industry value: $ million, 200509

Year $ million BRL million million % Growth

2005 37,970.0 76,261.5 27,306.5

2006 37,632.6 75,584.0 27,063.9 (0.9%)

2007 45,354.6 91,093.3 32,617.2 20.5%

2008 61,016.5 122,549.8 43,880.6 34.5%

2009 36,800.7 73,913.2 26,465.6 (39.7%)

CAGR: 200509 (0.8%)

Source: Datamonitor D A T A M O N I T O R

Figure 1: Brazil metals & mining industry value: $ million, 200509



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MARKET SEGMENTATION I



MARKET SEGMENTATION I

Iron & Steel is the largest segment of the metals & mining industry in Brazil, accounting for 77.1% of the

industry's total value.

The aluminum segment accounts for a further 9.7% of the industry.

Table 2: Brazil metals & mining industry segmentation I:% share, by value, 2009

Category % Share

Iron & Steel 77.1%

Aluminum 9.7%

Base metals 7.3%

Precious metals & minerals 4.7%

Coal 1.2%

Total 100%


Figure 2: Brazil metals & mining industry segmentation I:% share, by value, 2009



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MARKET SEGMENTATION II



MARKET SEGMENTATION II

Brazil accounts for 13.8% of the Americas metals & mining industry value.

The United States accounts for a further 46.6% of the Americas industry.

Table 3: Brazil metals & mining industry segmentation II: % share, by value, 2009

Category % Share

United States 46.6%

Brazil 13.8%

Canada 11.5%

Mexico 7.9%

Rest of the Americas 20.2%

Total 100%


Figure 3: Brazil metals & mining industry segmentation II: % share, by value, 2009



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COMPETITIVE LANDSCAPE




The metals & mining market will be analyzed by taking companies engaged in primary metal production

and mining as the key players. The key buyers will be taken as industrial consumers, and producers of

equipment, with suppliers of raw materials being the key suppliers.

The metals and mining industry was greatly affected by a global drop in commodity prices in 2009 which

caused a sharp decline in many markets.

Given the centrality of scale economies within the metals and mining industry there is a continuing

tendency towards concentration. The leading players are large multinationals who dominate the market.

Buyers come from numerous industries and the industry players can rely on a relatively large number of

customers. The need to defend margins against rising raw material prices serves as a driver of vertical

integration, evident in the fact that major steel and aluminum companies often own their own iron ore and

bauxite mines. Whilst it is possible to enter the industry it does require a significant outlay as it is essential

to build production facilities. This constitutes a strong entry barrier and raises exit costs, which tends toincrease rivalry in the industry. However, large-scale production and high fixed costs, especially energy,

block many potential new players from entering the industry.

This analysis will centre on steel production, a core component of the industry. Therefore, industry players

will be taken as steel makers. These companies make products such as steel rod, wire, and sheets. End

users include companies involved in industries such as the automotive and construction industries, as

well as stockholders and service centers. In some countries, there is a tendency for high-volume end-

users to purchase direct, while low-volume customers buy from stockholders and service centers. This

leads to the typical size of buyers being quite large. However, steel is so widely used that industry players

can rely on a relatively large number of customers overall, which reduces buyer power. On the other

hand, steel is commoditized with little to distinguish between the products of competitors in this industry,boosting buyer power to an extent. However, players in developed economies - mindful of the surge in

Chinese capacity - are seeking to differentiate themselves by focusing on added-value specialty products,

especially when selling in the more mature markets. Most buyers are unlikely to integrate backwards into

steel making, whereas steel makers are prone to integrate forwards into certain buyers' businesses, such

as engineered products. Steel manufacturers, for instance, may sell fabricated items as well as simple

sheets, rods, wire etc. This, as well as the necessity of these products to the success of the buyers'

business, tends to dilute the power of buyers, which is assessed as moderate overall.

Suppliers in this industry include producers of mining and production equipment, IT providers and also

suppliers of raw materials such as the iron ore, coal and coke needed for the production of steel. Although

some players rely on raw material producers, many are highly vertically integrated and provide their own

raw material. This strategy helps to decrease a company's dependence on third-party suppliers and offers

additional revenue stream if raw materials can be sold to other companies. This potential for backward

integration also weakens supplier power however it does require significant investment.


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Companies involved only in mining have suppliers in terms of equipment, IT, labor, and so on, as they are

the providers of raw materials only. However, they must ensure adequate reserves, as coal and metal

ores are non-renewable. This means that major landowners, governments, and similar bodies can be

viewed as suppliers, and exert strong power. In general, supplier power is weakened by the fact that the

metals and mining industry is integral to supplier revenues. Mining equipment, for example, is so

specialized that manufacturers would find it difficult to sell to any customer outside the industry. Similarly,

the quality and availability of the raw materials is essential to the efficient running of the metals and

mining industry. Consequently, concerns about the future availability and cost of inputs in steel production

could affect the industry dramatically, placing more power in the hands of suppliers. Overall supplier

power in this industry is moderate.

There is a strong tendency towards integration in the metals and mining industry. Cross-border mergers

have been taking place for several years with the focus being on technological improvements and new

products. Through integration, companies tend to strengthen their position, lower production costs, and

expand towards new markets. To enter the industry and make ground against incumbents that arecushioned by scale economies it is necessary to integrate. This trend puts smaller and weaker companies

out of the industry and lowers the risk of newcomers. The metals and mining industry faces increasingly

stringent environmental regulations, and companies are under pressure to develop cleaner and more

efficient technologies. Recent years have seen the punitive costs for violations of environmental

regulations increase, threatening margins. In fact, they now include criminal penalties in some

jurisdictions. Governments use a variety of strategies, e.g. tariffs, subsidies, loans and import restrictions

to ensure that the industry remains competitive domestically. In many cases, this has allowed the local

industry to continue operations even where better quality, cheaper commodities could be imported from

another country. Fixed costs in this industry are high as the main outgoings are transportation and energy

which have both faced increased prices. The Brazilian metals and mining industry saw a steep decline in

2009 as commodity prices crashed but strong growth is projected towards 2014. As a result, new entrants

may still be attracted to the market. Overall the threat of new entrants is assessed as weak.

There are potential substitutes for metal available. Stone or brick can be used in building construction,

carbon fiber materials may be substitutes for aluminum in aerospace applications, less common materials

like fiberglass (glass-reinforced plastic) can be especially advantageous in the automotive industry, where

manufacturers are looking to use lighter materials. The benefits of this include an improvement in fuel

consumption, there can sometimes be a reduction in manufacturing costs, and some plastics are as

recyclable as steel. Furthermore, metals such as steel can corrode whereas reinforced plastic is more

durable. However, not all buyers will replace metals with these alternatives as they do not provide all of

the same properties and are hardly 'drop-in replacements'. Using them would require substantial re-

tooling of an assembly line. Thus, although the price of the alternatives may be favorable in some market

conditions, switching costs are likely to be very high. Similarly, coal has several substitutes in the power

generation market: oil, gas, nuclear fuels, etc.


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However, while power companies can alter their primary energy mix to a small extent without incurring

many costs, a thoroughgoing transition to these substitutes would require investment in different

generation facilities, which constitutes a very high switching cost. The threat of substitutes overall is

viewed as weak.

The metals and mining industry is concentrated and is represented by a limited number of large,

multinational players offering similar products and services within each segment. Metal is a commodity

difficult to diversify strongly, however different customers may require different specifications (e.g.

consistency in physical properties, variations in strength and rigidity etc) and producers may tend to

specialize, thereby reducing competition but also limiting the size of their potential market. Although some

of the players have other businesses and are often geographically diversified, insulating them from

fluctuations in particular markets, their relative lack of diversification increases rivalry. The centrality of

scale economies in the metal and coal industry favors larger companies, which means that deeper

consolidation through mergers and acquisitions is to be expected, especially in the more fragmented

markets. Exit barriers are high, because many of the major tangible assets are highly specific to theirindustry, and thus harder to divest. In this situation, players are strongly motivated to remain in the

industry even when conditions are difficult, boosting rivalry. However, this is a cyclical industry, in which

growth cannot always be sustained. Industry margins are susceptible to changes in raw material and

energy prices. Overall, rivalry is assessed as strong.


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LEADING COMPANIES



LEADING COMPANIES

BHP Billiton Group

Table 4: BHP Billiton Group: key facts

Head office: 180 Lonsdale Street, Melbourne, Victoria 3000, AUS

Telephone: 61 1300 554 757

Fax: 61 3 9609 3015

Website: www.bhpbiliton.com

Financial year-end: June

Ticker: BLT, BHP

Stock exchange: London, New York

Source: company website D A T A M O N I T O R

BHP Billiton Group comprises two entities: BHP Billiton Limited and BHP Billiton Plc. The two entities

exist as separate companies, but operate as a combined company known as BHP Billiton Group (BHP

Billiton).

BHP Billiton is a diversified natural resources group. The group exports metallurgical coal for the steel

industry and energy coal. BHP Billiton is engaged in the production of iron ore, copper, nickel,

manganese ore, primary aluminums, and manganese and chrome ferroalloys. Furthermore, BHP Billiton

also has substantial interests in oil, gas, liquefied natural gas (LNG), diamonds, silver, and titanium

minerals. The group has a global presence with more than 100 operations in 25 countries.

BHP Billiton operates nine customer sector groups (CSGs) aligned with the commodities which it extracts

and markets. They are base metals, petroleum, iron ore, energy coal, aluminum, stainless steel materials,

metallurgical coal, manganese, and diamonds and specialty products.

The base metals CSG produces copper, silver, lead, uranium, and zinc. It provides copper, lead, and zinc

concentrates to smelters worldwide. It sells copper cathodes to rod and brass mills and casting plants and

uranium oxide to electricity generating utilities, primarily in Western Europe, North America, and North

Asia. BHP Billiton's key base metals assets include Escondida copper mine in northern Chile, the Cerro

Colorado copper mine in northern Chile, Spence copper mine in Chile, Antamina copper mine in Peru, theCannington mine (with silver, lead, and zinc ores) in Australia, Olympic Dam in South Australia, and Pinto

Valley in Arizona. In FY2009, BHP Billiton produced 1.2 million tones of copper.

The petroleum CSG comprises oil and natural gas exploration, production, and development in Australia,

the US, Algeria, Trinidad and Tobago, Pakistan, and the Gulf of Mexico.


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LEADING COMPANIES



It also conducts an international exploration and development program as well as marketing crude oil,

condensate, liquefied petroleum gases, natural gas, and liquefied natural gas to customers globally. BHP

Billiton produced 137.19 million barrels of oil equivalent in FY2009.

The iron ore CSG is one of the leading suppliers of seaborne iron ore globally. Its operations comprise

Western Australia Iron Ore (WAIO) business and a 50% interest in the Samarco joint venture with Vale in

Brazil. WAIO's operations involve a complex integrated system of seven mines and more than 1,000

kilometers of rail and port facilities, all located in the Pilbara region of northern Western Australia.

BHP Billiton's energy coal CSG produces, markets, and exports thermal coal (steaming coal). The group

operates three sets of assets: a group of mines and associated infrastructure collectively known as BHP

Billiton Energy Coal South Africa (BECSA), New Mexico Coal operations in the US, and Hunter Valley

Energy Coal operations in New South Wales, Australia. BHP Billiton also owns a one-third share of the

Cerrejon Coal Company, which operates a coal mine in Colombia.

The aluminum CSG is engaged in the production of aluminum, bauxite, and alumina. It has four aluminum

smelters in South Africa, Mozambique, and Brazil; and three alumina refineries and three bauxite mining

operations in Australia, Suriname, and Brazil. BHP Billiton is one of the largest producers of primary

aluminum. In FY2009, it produced approximately 1.2 million tons of aluminum, approximately 15 million

tons of bauxite, and 4.4 million tons of alumina.

The stainless steel materials CSG supplies a variety of nickel products to the global steel industry. In

addition, it also supplies nickel and cobalt to other markets including the specialty alloy, foundry,

chemicals, and refractory material industries. The segment produces nickel and cobalt at Yabulu and

Nickle West in Australia and Cerro Matoso in Columbia.

BHP Billiton metallurgical coal CSG is one of the largest global suppliers of seaborne metallurgical coal. It

primarily produces and markets hard coking coals for the global steel industry. In addition, it also supplies

a range of other coal qualities. The group owns production assets in two major resource basins, the

Bowen Basin in Central Queensland, Australia and the Illawarra region of New South Wales, Australia.

BHP Billiton's manganese operations produce a combination of ores, alloys, and metal from sites in South

Africa and Australia. The group owns and manages all of its manganese mining assets and alloy plants

through 60-40 joint ventures with an Anglo-American joint venture known as Samancor Manganese. The

Samancor Manganese joint venture owns Hotazel Manganese Mines (HMM) and Metalloys, both situated

in South Africa and the Groote Eylandt Mining Company (GEMCO) and Tasmanian Electro MetallurgicalCompany (TEMCO) located in Australia. In July 2009, Samancor sold 26% of HMM in a series of

transactions designed to comply with South Africa's Black Economic Empowerment requirements. The

joint venture also owns 51% of the Manganese Metal Company, which operates a manganese metal plant

in South Africa.


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LEADING COMPANIES



The diamonds and specialty products CSG comprises the businesses of diamonds and titanium minerals,

and the exploration and development of a potash business. The group's Ekati Diamond Mine, of which it

owns 80%, is located in the Canadian Northwest Territories and produces over 3 million carats of rough

diamonds annually. It sells polished diamonds, manufactured through contract polishing arrangements,

through its CanadaMark and AURIAS brands. BHP Billiton owns 50% of Richards Bay Minerals (RBM), a

heavy mineral sands mine and smelter situated in northern KwaZulu-Natal, South Africa. RBM is a major

producer of titania slag, high purity pig iron, rutile, and zircon. It has a titania slag project at Corridor

Sands in Mozambique.

In July 2008, the group acquired the remaining 25% of interest in a joint venture with Anglo Potash

formed for a large land position in Saskatchewan, Canada. BHP Billiton currently controls 100% of the

land position. The company's permit positions for potash extend over 7,338 square kilometers of highly

prospective exploration ground within Saskatchewan and Manitoba. It is currently undertaking a pre-

feasibility study for the Jansen project in Saskatchewan.

Key Metrics

The company recorded revenues of $50,211 million in the fiscal year ending June 2009, a decrease of

15.6% compared to fiscal 2008. Its net income was $6,338 million in fiscal 2009, compared to a net

income of $15,962 million in the preceding year.

Table 5: BHP Billiton Group: key financials ($)

$ million 2005 2006 2007 2008 2009Revenues 31,150.0 39,099.0 47,473.0 59,473.0 50,211.0

Net income (loss) 6,628.0 10,450.0 13,496.0 15,962.0 6,338.0

Total assets 45,077.0 51,343.0 61,404.0 76,008.0 78,770.0

Total liabilities 23,927.0 24,283.0 31,737.0 37,673.0 38,816.0

Employees 36,468 33,184 33,861 41,732 40,990

Source: company filings D A T A M O N I T O R


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LEADING COMPANIES



Table 6: BHP Billiton Group: key financial ratios

Ratio 2005 2006 2007 2008 2009

Profit margin 21.3% 26.7% 28.4% 26.8% 12.6%Revenue growth 24.9% 25.5% 21.4% 25.3% (15.6%)

Asset growth 44.6% 13.9% 19.6% 23.8% 3.6%

Liabilities growth 55.1% 1.5% 30.7% 18.7% 3.0%

Debt/asset ratio 53.1% 47.3% 51.7% 49.6% 49.3%

Return on assets 17.4% 21.7% 23.9% 23.2% 8.2%

Revenue per employee $854,174 $1,178,249 $1,401,996 $1,425,117 $1,224,957

Profit per employee $181,748 $314,911 $398,571 $382,488 $154,623


Figure 4: BHP Billiton Group: revenues & profitability



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LEADING COMPANIES



Figure 5: BHP Billiton Group: assets & liabilities



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LEADING COMPANIES



Gerdau S.A.

Table 7: Gerdau S.A.: key facts

Head office: Av. Farrapos, 1811 Floresta, Porto Alegra, Rio Grande do Sul90220005, BRA

Telephone: 55 51 3323 2000

Fax: 55 51 3323 2222

Website: www.gerdau.com.br

Financial year-end: December

Ticker: GGB, GGBR4

Stock exchange: New York, Sao Paulo


Gerdau is a Brazil-based long steel producer, ranking as the largest steel producer in Brazil and the

Americas. The company operates steel mills that produce steel by direct iron-ore reduction (DRI) in blast

furnaces and in electric arc furnaces. In Brazil, it operates three blast furnace steel mills, including its

largest mill, Gerdau Acominas, an integrated steel mill. The company has 60 steel producing units

globally, including joint ventures and associated companies. The joint ventures include a unit located in

the US for the production of flat rolled steel, and another unit in India. The associated companies are

Aceros Corsa in Mexico; Corporacion Centroamericana del Acero in Guatemala; and INCA in the

Dominican Republic.

The company operates in Brazil, Argentina, Chile, Colombia, Peru, Uruguay, Mexico, Dominican

Republic, Venezuela, Guatemala, the US, Canada, Spain and India. The company has an installed

capacity of 26 million tons of crude steel and 22 million tons of rolled steel products annually. The

company also has presence in North America, Latin America and Europe.

The company offers a range of steel products. Its product mix includes crude steel (slabs, blooms and

billets) sold to rolling mills, finished products for the construction industry, such as rods and structural

bars, finished products for industry such as commercial rolled steel bars and machine wire and products

for farming and agriculture, such as poles, smooth wire and barbed wire. It also produces specialty steel

products for the manufacture of tools and machinery, chains, locks and springs, mainly for the automotive

and mechanical industries.


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LEADING COMPANIES



Gerdau is a non-operational holding company controlled by a Metalurgica Gerdau. The company

operates through following subsidiaries: Gerdau Acos Longos (Brazil), Gerdau Comercial de Acos

(Brazil), Gerdau Aominas (Brazil), Gerdau Ameristeel (US/Canada), Gerdau Acos Especiais (Brazil),

Corporacion Sidenor (Spain), Gerdau MacSteel (US), Gerdau Laisa (Uruguay), Gerdau Chile Inversiones

(Chile), Sipar Gerdau Inversiones and Diaco (Colombia), Empresa Siderurgica del Peru, Gerdau GTL

Mexico (Mexico), Siderurgica Zuliana (Venezuela) and Seiva (Brazil).

The company operates through five business segments: North America includes all North American

operations, except for the Mexican operations and specialty products (MacSteel); long steel Brazil;

specialty steel includes the specialty steel operations in Brazil, Europe and the US; Acominas Ouro

Branco and Latin America include all Latin American operations, except for the Brazil operations.

The company's North America segment is operated through its Gerdau Ameristeel subsidiary. Gerdau

Ameristeel is the second largest mini-mill steel producer in North America with annual manufacturing

capacity of over 10.3 million tons of mill finished steel products. It has a vertically integrated network of 18steel units and one 50%-owned joint venture for the operation of a mini-mill, 22 scrap recycling facilities,

14 downstream operations (including three 50%-owned joint ventures), and 56 fab shops. Gerdau

Ameristeel primarily serves customers in the eastern parts of the US and Canada. Its products are

generally sold to steel service centers and steel fabricators, or directly to original equipment

manufacturers, for use in a variety of industries, including construction, automotive, mining, cellular and

electrical transmission, metal construction fabrication and equipment.

Gerdau Ameristeel is organized into two business segments: mills and downstream. The mills segment

manufactures and markets a range of steel products, including steel reinforcement bars (rebar), merchant

bars, structural shapes, beams, special sections and coiled wire rod. The mills segment also produces

rebar, merchant bars, rod and special bar quality products used by the downstream segment. The

downstream segment comprises secondary value-added steel businesses and consists of fabrication of

rebars, railroad spikes, cold drawn products, super light beam processing, elevator guide rails, grinding

balls, wire mesh and collated nails.

The long steel Brazil segment is the largest distribution channel with 68 stores throughout Brazil, 14

fabricated reinforcing steel facilities (Prontofer) and four flat steel service centers, which serviced more

than 120,000 customers in 2008.

The specialty steel segment includes the operations in Brazil (Piratini and Acos Villares), the US

(MacSteel) and Spain (Corporacion Sidenor). These operations produce engineering steel, tool steel,special bar quality and stainless steel. Gerdau's main specialty steel operation is located in Brazil through

Acos Villares (Sao Paulo) and Piratini (Rio Grande do Sul), with combined annual capacity of 1.4 million

tons of crude steel and 1.5 million tons of rolled steel, which is sold in the domestic and export markets.


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LEADING COMPANIES



Gerdau maintains a presence in North America through MacSteel, the second largest producer of

specialty steel (Special Bar Quality - SBQ) in the US. MacSteel operates three mini-mills, located in

Jackson, Michigan; Monroe, Michigan; and Fort Smith, Arkansas. The company also operates six

downstream operations located in the states of Michigan (two), Ohio, Indiana (two) and Wisconsin.

MacSteel has annual installed capacity of 1.2 million tons of crude steel and 1.1 million tons of rolled

products. Corporacion Sidenor sells specialty steel to the entire Europe continent with more than 450

clients located across Spain, France, Germany and Italy. It has annual installed capacity of 1.2 million

tons of crude steel and rolled products.

The Acominas Ouro Branco segment's products are sold to rolling mills and to companies that use slabs,

billets, blooms and ingots as raw material for their finishing lines such as shipbuilding, forging and

mechanical. The segment also produces its own finished products such as high quality wire rod and

sections.

The Latin America business segment operations include 20 steel units 25 retail facilities, 12 fab shops(including joint ventures and associated companies) and six scrap processing facilities located in nine

countries. It operates mini-mills facilities with annual manufacturing capacity of 2.9 million tons of finished

steel products. In Chile, the company operates under the name Gerdau AZA. The company operates a

business unit known as AZAonLine, which services customers in Chile through the internet. The company

sells its products to more than 150 clients, which are both distributors and end-users. The company

operates through Diaco in Colombia, Siderperu in Peru, and Sidertul in Mexico.

Gerdau's production processes are mainly based on the mini-mill concept, with mills equipped with

electric arc furnaces that can melt steel scrap and produce the steel product with the required

specifications. The main metallic input used by the company's mills in the US is steel scrap. The

company's Brazilian mills use scrap and pig iron purchased from local suppliers. The division Gerdau

Metalicos collects and supplies scrap to the industrial units; and also recycles the steel scrap.

Key Metrics

The company recorded revenues of $13,214 million in the fiscal year ending December 2009, a decrease

of 37.2% compared to fiscal 2008. Its net income was $559 million in fiscal 2009, compared to a net

income of $1,962 million in the preceding year.


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LEADING COMPANIES



Table 8: Gerdau S.A.: key financials ($)

$ million 2005 2006 2007 2008 2009

Revenues 10,643.4 11,723.8 15,301.2 21,028.9 13,214.1Net income (loss) 1,384.6 1,766.0 1,767.5 1,961.9 558.6

Total assets 10,893.4 13,408.2 20,651.5 29,401.0 22,197.7


Employees 0 0 0 0 0


Table 9: Gerdau S.A.: key financials (BRL)

BRL million 2005 2006 2007 2008 2009Revenues 21,377.0 23,547.0 30,732.0 42,236.0 26,540.0

Net income (loss) 2,781.0 3,546.9 3,549.9 3,940.5 1,122.0

Total assets 21,879.0 26,930.0 41,478.0 59,051.0 44,583.3



Table 10: Gerdau S.A.: key financial ratios

Ratio 2005 2006 2007 2008 2009

Profit margin 13.0% 15.1% 11.6% 9.3% 4.2%

Revenue growth 8.0% 10.2% 30.5% 37.4% (37.2%)

Asset growth 17.2% 23.1% 54.0% 42.4% (24.5%)

Liabilities growth 9.9% 51.5% 37.2% 35.1% (32.9%)

Debt/asset ratio 63.2% 77.8% 69.4% 65.8% 58.5%

Return on assets 13.7% 14.5% 10.4% 7.8% 2.2%



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LEADING COMPANIES



Figure 6: Gerdau S.A.: revenues & profitability


Figure 7: Gerdau S.A.: assets & liabilities



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LEADING COMPANIES



Vale S.A.

Table 11: Vale S.A.: key facts

Head office: Avenida Graca Aranha, No. 26, Rio de Janeiro 20030 900, BRA

Telephone: 55 21 3814 4477

Fax: 55 21 3814 4040

Website: www.vale.com

Financial year-end: New York, , Madrid, Madrid, BM&F Bovespa, BM&F Bovespa

Ticker: VALE,XVALP, XVALO VALE 3, VALE 5

Stock exchange: December


Vale is engaged in the production and export of iron ore and pellets. It also produces nickel, copper,

manganese, ferroalloys, bauxite, precious metals, cobalt, kaolin, potash, and other products. The

company is actively engaged in mineral exploration efforts in 22 countries globally. It operates in America,

Europe, Middle East, Asia, Africa, and Oceania.

The company operates through four business divisions: ferrous minerals, non-ferrous minerals, logistics

services, and others.

Through its ferrous minerals division, Vale is engaged in the business of iron ore mining, iron ore pellet

production, manganese ore mining, and ferroalloy production.

Vale conducts its iron ore business in Brazil, primarily at the parent-company level and through its

subsidiary Urucum Mineracao (Urucum). The company operates its iron ore mining and related

operations through three integrated systems, the Southeastern System, the Southern System, and the

Northern System.

The Southeastern System mines are located in the Iron Quadrangle region of the state of Minas Gerais,

where they are divided into three mining complexes, Itabira, Minas Centrais, and Mariana. These mines

are also in the state of Mato Grosso do Sul, where the Urucum mine is located. Vale conducts open-pit

mining operations in the Southeastern System. In FY2008, the company produced 99.4% of the electric

energy consumed in the Southeastern System at its hydroelectric power plants (Igarapava, Porto Estrela,Funil, Candonga, Aimores, Capim Branco I, and Capim Branco II). The company owns and operates

integrated railroad and terminal networks in the three mining complexes of the Southeastern System.

The Southern System mines are located in the Iron Quadrangle region of the state of Minas Gerais in

Brazil. It consists of the mines of Mineracoes Brasileiras Reunidas (MBR), a subsidiary of Vale.


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LEADING COMPANIES



Under its aluminum business, Vale is engaged in bauxite mining, alumina refining, and aluminum metal

smelting. In Brazil, Vale owns a bauxite mine, an alumina refinery, and two aluminum smelters. The

company has a 40% interest in Mineracao Rio do Norte (MRN), a bauxite producer, operations of which

are also located in Brazil.

Under its copper business, Vale has copper mining operations in Brazil and Canada. In Brazil, Vale

produces copper concentrates at Sossego in Carajas, in the state of Para. In Canada, Vale produces

copper concentrate, copper anode, and copper cathode in conjunction with its nickel mining operations at

Sudbury, Thompson, and Voisey's Bay.

Vale produces PGMs as by-products of its nickel mining and processing operations in Canada. The

PGMs are concentrated at its Port Colborne facilities, in the Province of Ontario, Canada, and refined at

its precious metals refinery in Acton, England.

Vale also produces gold and silver as by-products of its nickel mining and processing operations inCanada. Some of these precious metals are upgraded at its facilities in Port Colborne, Ontario, and all are

refined by unrelated parties in Canada.

Vale also produces other non-ferrous minerals. Vale is the world's fourth largest producer of kaolin for the

paper industry and Brazil's sole producer of potash. Vale produces cobalt as a by-product of its nickel

mining and processing operations in Canada and refines it at its Port Colborne facilities.

The logistics services division of Vale consists of the company's transportation systems that pertain to the

operation of its ships, ports, and railroads for third-party cargos. It provides logistics services in Brazil,

with railroad, coastal shipping, and port handling operations. Two of the company's three iron ore systems

incorporate an integrated railroad network linked to automated port and terminal facilities. These

complexes provide rail transportation for the company's mining products, general cargo and passengers,

bulk terminal storage, and ship loading services for its mining operations. The company also has a 31.3%

interest in Log-In Logistica Intermodal (Log-In), which provides container-based logistics services in

Brazil, and a 41.5% interest in MRS Logistica (MRS), which transports Vale's iron ore products from the

Southern System mines to its Guaiba Island and Itaguai maritime terminals, in the state of Rio de Janeiro.

Under its others business division, the company produces metallurgical and thermal coal through Vale

Australia Holdings (Vale Australia), which operates coal assets in Australia through wholly-owned

subsidiaries and unincorporated joint ventures. Vale also has minority interests in Chinese coal and coke

producers. Vale also has ownership interest in California Steel Industries (CSI), a flat-rolled steelproducer in the US. CSI produces approximately 1.8 million metric tons of flat steel per year. Vale has

investments in several steel projects in order to create additional demand for its iron ore and iron ore

pellets.


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LEADING COMPANIES



Key Metrics

The company recorded revenues of $19,915 million in the fiscal year ending 2009, a decrease of 43.4%

compared to fiscal 2008. Its net income was $5,277 million in fiscal 2009, compared to a net income of

$10,595.

Table 12: Vale S.A.: key financials ($)

$ million 2005 2006 2007 2008 2009

Revenues 17,165.3 22,735.2 32,970.9 35,191.0 19,915.3

Net income (loss) 5,199.5 6,687.2 9,960.8 10,595.1 5,276.8

Total assets 26,684.0 61,245.1 66,168.8 92,497.8 102,280.5


Employees 38,560 52,646 0 0 57,043


Table 13: Vale S.A.: key financials (BRL)

BRL million 2005 2006 2007 2008 2009

Revenues 34,476.0 45,663.0 66,221.0 70,680.0 39,999.3

Net income (loss) 10,443.0 13,431.0 20,006.0 21,280.0 10,598.4

Total assets 53,594.0 123,009.0 132,898.0 185,779.0 205,427.4




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LEADING COMPANIES



Table 14: Vale S.A.: key financial ratios

Ratio 2005 2006 2007 2008 2009

Profit margin 30.3% 29.4% 30.2% 30.1% 26.5%Revenue growth 16.2% 32.4% 45.0% 6.7% (43.4%)

Asset growth 23.3% 129.5% 8.0% 39.8% 10.6%

Liabilities growth 24.7% 184.0% (9.6%) 18.0% (6.2%)

Debt/asset ratio 55.1% 68.2% 57.1% 48.2% 40.9%

Return on assets 21.5% 15.2% 15.6% 13.4% 5.4%


Figure 8: Vale S.A.: revenues & profitability



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LEADING COMPANIES



Figure 9: Vale S.A.: assets & liabilities



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MARKET FORECASTS



MARKET FORECASTS

Market value forecast

In 2014, the Brazilian metals & mining industry is forecast to have a value of $60,459.2 million, anincrease of 64.3% since 2009.

The compound annual growth rate of the industry in the period 200914 is predicted to be 10.4%.

Table 15: Brazil metals & mining industry value forecast: $ million, 200914

Year $ million BRL million million % Growth

2009 36,800.7 73,913.2 26,465.6 (39.7%)

2010 50,026.2 100,476.1 35,976.8 35.9%

2011 53,859.6 108,175.3 38,733.7 7.7%

2012 56,179.5 112,834.8 40,402.0 4.3%

2013 58,353.5 117,201.4 41,965.5 3.9%

2014 60,459.2 121,430.6 43,479.9 3.6%

CAGR: 200914 10.4%


Figure 10: Brazil metals & mining industry value forecast: $ million, 200914



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MACROECONOMIC INDICATORS




Table 16: Brazil size of population (million), 200509

Year Population (million) % Growth

2005 189.0 1.3%

2006 191.5 1.3%

2007 193.9 1.3%

2008 196.3 1.2%

2009 198.7 1.2%


Table 17: Brazil GDP (constant 2000 prices, $ billion), 200509

Year Constant 2000 Prices, $ billion % Growth

2005 738.6 3.1%

2006 767.4 3.9%

2007 810.4 5.6%

2008 851.9 5.1%

2009 850.3 (0.2%)


Table 18: Brazil GDP (current prices, $ billion), 200509

Year Current Prices, $ billion % Growth

2005 840.8 32.4%

2006 1,018.7 21.2%

2007 1,245.3 22.2%

2008 1,467.0 17.8%

2009 1,374.4 (6.3%)



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Table 19: Brazil inflation, 200509

Year Inflation Rate (%)

2005 6.9%2006 4.2%

2007 3.6%

2008 5.7%

2009 4.3%


Table 20: Brazil consumer price index (absolute), 200509

Year Consumer Price Index (2000 =100)

% Growth

2005 151.4 6.9%

2006 157.8 4.2%

2007 163.5 3.6%

2008 172.8 5.7%

2009 180.2 4.3%


Table 21: Brazil exchange rate, 200509

Year Exchange rate ($/BRL) Exchange rate (/BRL)

2005 2.4348 3.0264

2006 2.1800 2.7351

2007 1.9516 2.6704

2008 1.8402 2.6927

2009 2.0085 2.7928



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APPENDIX



APPENDIX

Methodology

Datamonitor Industry Profiles draw on extensive primary and secondary research, all aggregated,analyzed, cross-checked and presented in a consistent and accessible style.

Review of in-house databases Created using 250,000+ industry interviews and consumer surveys

and supported by analysis from industry experts using highly complex modeling & forecasting tools,

Datamonitors in-house databases provide the foundation for all related industry profiles

Preparatory research We also maintain extensive in-house databases of news, analyst

commentary, company profiles and macroeconomic & demographic information, which enable our

researchers to build an accurate market overview

Definitions Market definitions are standardized to allow comparison from country to country. The

parameters of each definition are carefully reviewed at the start of the research process to ensure they

match the requirements of both the market and our clients

Extensive secondary research activities ensure we are always fully up-to-date with the latest

industry events and trends

Datamonitor aggregates and analyzes a number of secondary information sources, including:

- National/Governmental statistics

- International data (official international sources)

- National and International trade associations

- Broker and analyst reports

- Company Annual Reports

- Business information libraries and databases

Modeling & forecasting tools Datamonitor has developed powerful tools that allow quantitative

and qualitative data to be combined with related macroeconomic and demographic drivers to create

market models and forecasts, which can then be refined according to specific competitive, regulatory

and demand-related factors

Continuous quality control ensures that our processes and profiles remain focused, accurate and

up-to-date


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APPENDIX



Industry associations

International Iron and Steel Institute

Rue Colonel Bourg, 120, B-1140 Brussels, Belgium

Tel.: 322 702 89 00Fax: 322 702 88 99

www.worldsteel.org

International Aluminium Institute

New Zealand House, Haymarket, London, SW1Y 4TE, UK

Tel.: 44 20 7930 0528

Fax: 44 20 7321 0183

www.world-aluminium.org

World Coal Institute5th Floor, Heddon House, 149 - 151 Regent Street, London, W1B 4JD, UK

Tel.: 44 20 7851 0052

Fax: 44 20 7851 0061

www.wci-coal.com

MEPS

www.meps.co.uk

World Gold Council

55 Old Broad Street, London EC2M 1RX, United Kingdom

Tel.: 0044 20 7826 4700

Fax: 0044 20 7826 4799

www.gold.org

Related Datamonitor research

Industry Profile

Metals & Mining in France

Metals & Mining in Germany

Metals & Mining in the United Kingdom

Metals & Mining in Belgium


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APPENDIX



Disclaimer

All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form

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permission of the publisher, Datamonitor plc.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed.

Please note that the findings, conclusions and recommendations that Datamonitor delivers will be

based on information gathered in good faith from both primary and secondary sources, whose

accuracy we are not always in a position to guarantee. As such Datamonitor can accept no liability

whatever for actions taken based on any information that may subsequently prove to be incorrect.


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Documents

Brazil 2011 Mining - BMI