China demand and energy transition drive sector growth despite price and tariff risks
04/29/2025
Brazil’s mining industry remains optimistic about the market outlook. The expectation is that Chinese demand for iron ore will remain resilient and that the sector can increasingly play a prominent role in the global economy, especially with the rise of critical and strategic minerals essential for the energy transition. Investments projected between 2025 and 2029 total $68.4 billion, up 6.6% from the previous period (2024–2028), according to the Brazilian Mining Institute (IBRAM).
IBRAM’s projections still account for certain challenges facing the sector, including uncertainties from the U.S.–China trade war and the 25% tariffs imposed by U.S. President Donald Trump on Brazilian aluminum and steel. Iron ore is a key input in steel production. Another concern is the volatility in mineral prices. In 2024, iron ore prices declined from $135 per tonne in January to $105 in December.
“Iron ore prices this year are expected to remain in the $95 to $105 per tonne range,” said Julio Nery, IBRAM’s director of mining affairs. Despite last year’s drop in international prices, mining industry revenues were not negatively affected. IBRAM’s report shows that revenue grew 9.1% in 2024, reaching R$270.8 billion, with iron ore accounting for 59% of the total. The increase was driven by the stronger exchange rate and robust mineral sales, with iron ore revenues rising 8.6% year over year.
Of the total investments projected over the next four years, 28.7%—or $19.59 billion— will be made by iron ore mining companies. That figure is 13.4% higher than the investment forecast for the 2024–2028 period. According to IBRAM, the U.S.–China trade war has not yet disrupted the sector’s investment timeline, but it has raised red flags.
In the case of iron ore, Brazil has long relied on Chinese demand. Even during periods of economic slowdown, Beijing has consistently imported large volumes of Brazilian ore, despite competition from geographically closer producers like Australia—a major supplier whose ore is considered to have lower purity levels than Brazil’s. “Brazilian iron commands a $5 to $10 premium for its quality. Higher-grade ore consumes less energy in processing and produces less slag [a byproduct used in cement],” said Mr. Nery.
In 2024, Brazil exported 389 million tonnes of iron ore and its products, with nearly two-thirds bound for China. These shipments generated $29.85 billion in revenue, placing the sector behind only crude oil ($44.84 billion) and soybeans ($42.9 billion) in export earnings.
The U.S. imported $4.677 billion in Brazilian iron and steel products, accounting for 14.9% of its total imports in those segments—second only to Canada (24.2%). However, unlike exports to China, which are mostly of beneficiated raw ore (processed through crushing, grinding, and magnetic separation), Brazil exports very little raw ore to the U.S., according to Mr. Nery. “The tariff hikes affect steelmakers, not miners,” he said.
Due to the large-scale steel processing infrastructure in the U.S., Brazilian iron is mostly exported in the form of semi-finished steel and pig iron—a processed product free of slag. Pig iron is made in blast furnaces using coke or charcoal and limestone, and serves as an intermediate product for steelmaking in U.S. plants.
According to Lucas Laghi, head of mining and steel at XP, the main exporters of pig iron are ArcelorMittal and Argentina’s Ternium, both of which are privately held. “In the case of CSN, Usiminas, and Gerdau—all publicly traded—exports to the U.S. are limited,” said Mr. Laghi, who does not expect any “sharp turns” in announced investments. “When it comes to iron, the sector is closely tied to China, and there’s no sign of significant shifts in steel demand. We might see more volatility in metals like nickel and copper, which are more exposed to fluctuations in global growth,” he added.
*By Guilherme Meirelles — São Paulo
Source: Valor International
https://valorinternational.globo.com/