Industry Trend Analysis - Three Key Challenges For Brazil's Mining Sector - JULY 2016


BMI View: The three key challenges facing Brazil ' s otherwise improving mining industry will be weaker - than - expected mineral prices, the domestic economic crisis and political backlash from the November 2015 Samarco dam burst.

While we maintain a positive outlook for Brazil's mining industry value growth, supported by a strong project pipeline and mineral price stabilisation over the coming quarters, the sector will face three key challenges. Indeed, we highlight the country's mining sector as increasingly attractive to foreign investment as mineral prices bottom out and over-leveraged firms offload core assets ( see ' Price Stabilisation, Prime Asset Sales To Attract Investors ' , May 25). Despite this, Brazil, Latin America's largest mining sector, will face a difficult climb to return to previous heights, as the country's mining industry value (MIV) has halved since 2011, plummeting from USD85.9bn to our 2016 forecast of USD41.4bn. We expect Brazil's MIV to bottom out in 2016 and forecast a gradual recovery thereafter, reaching USD55.8bn by 2020.

1. Downside Risks To Price Forecasts

Difficult Climb After Six-Year Decline
Brazil - Mining Industry Value (LHS, USDbn) & Growth (RHS, % y-o-y)
e/f = BMI estimate/forecast. Source: BMI, IBGE

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