Brazilian miners looking to iron out the wrinkles of a soft market

Miners of iron ore, which is the dominant production in Brazil’s mining sector, are debating the challenges they face amid the weakening market for this commodity.

Brazil is a global powerhouse in iron ore production. In the first half of the year, of the 130 billion reais (US$23bn) in revenues registered by the mining sector, 80.1bn reais came from iron ore production, according to figures compiled by mining association Ibram.

Iron ore also represents 71.6% of Brazil’s mining exports, while US$17bn of the total US$64.5bn investments planned in the domestic mining industry in 2024-28 will go to projects in this segment.

However, the heavy reliance on iron ore in Brazil has become a problem due to the slowdown in the Chinese economy, which is the primary consumer of the country’s exports.

"China currently accounts for 50% of the global iron ore market, and this demand is closely tied to the performance of its infrastructure and civil construction sectors. As these areas are facing difficulties, iron ore prices have come under pressure, currently sitting below US$100/t, and they are expected to remain low until the Chinese government announces domestic stimuli to spur economic recovery," Pedro Galdi, a mining consultant, told BNamericas.

In response to this scenario, companies involved in iron ore production have been exploring solutions to resolve their difficulties, including focusing on improving ore quality to attract buyers looking to reduce their greenhouse gas emissions.

"Our strategy is centered on quality, always aiming for the lowest production costs. We’re confident that demand for high-quality ore will continue to grow. Quality, combined with cost efficiency and integrated logistics, will position Brazil as a top-tier supplier," said Eduardo Jorge Ledsham, CEO of iron ore producer Bahia Mineração, during a panel at Exposibram, an annual mining event in Brazil organized by Ibram.

According to analysts, Brazilian iron ore is considered high-grade, meaning it requires less processing in steel mills, reducing the need for blast furnaces.

"Brazil has the highest quality iron ore, and mining companies also produce related products like iron ore pellets and briquettes, which meet the growing demand from steel mills for inputs that lower greenhouse gas emissions during production. Brazilian mining firms are increasingly leveraging this environmental appeal," added Galdi.

Ana Sanches, CEO of Anglo American in Brazil, emphasized the importance of innovation and operational excellence in addressing these challenges.

"In this environment, innovation, technological development, and process excellence are more critical than ever. Small improvements, when combined, will enhance our competitiveness and allow us to maintain our significant role in the global market," said Sanches.

Meanwhile, Jayme Nicolato Corrêa, director of Mineração Morro do Ipê, anticipates increased demand and production of high-grade iron ore with low levels of contaminants. He also highlighted the difficulties faced by regions such as the Iron Quadrangle in Minas Gerais state, which relies primarily on medium- and low-grade ore reserves.

"This situation will have a significant impact, especially on smaller companies, but the future remains promising. Major projects are underway, including railroad and infrastructure developments. We need to think strategically to access the railroads, implement filtration systems, expand the truck fleet and improve our competitiveness," said Corrêa.