Trends and opportunities
The market
Brazil is one the biggest global players in the mining sector. It is the world’s largest producer of niobium, second largest exporter of iron ore and manganese and among the largest producers of bauxite and tin. Iron ore accounts for 80 per cent of Brazil’s mining exports and provides 30 per cent of global demand, with the remainder provided by Australia (Source: Brazilian Mining Institute, October 2015).
The minerals sector accounts for five per cent of Brazil’s Gross Domestic Product (2015) and 21 per cent of total exports. Iron ore alone is responsible for 11.5 per cent of exports, of which China takes half (Source: Brazil Mining Report Q4 2016).
According to the Brazilian Mining Institute, in 2015 the mining sector generated 2.7 million direct and indirect jobs. This number represents nearly eight per cent of all jobs created in Brazil. Nevertheless, the sector suffers with a lack of qualified
employees and an urgent requirement for skilled training services (Source: Brazilian Mining Institute).
Despite the global mining downturn and competition for the Chinese iron ore market, Brazil’s major mining company Vale continues to sell record tonnages and generate significant profits with relatively low-cost production. In order to remain competitive, mining companies in Brazil are looking at solutions to increase productivity and reduce costs. There is a growing appreciation for innovative technologies and autonomous operations and robotics.
A feature of Brazil’s mining sector is the gradual move towards exploration and operations in the country’s tropical northern states, which are home to the largest high-grade iron ore deposits. In particular, the northern state of Pará represents opportunities for Australian mining equipment, technology and services (METS) companies with capabilities to operate in tropical, indigenous and remote environments.
In 2015, Brazil faced its worst environmental mining disaster in history with the bursting of two dams at an iron ore mine operated by Samarco, a joint venture between BHP Billiton and Vale, in Mariana in the state of Minas Gerais. The Renova Foundation has been created to manage the repair and reconstruction programs of the region affected and it may represent opportunities for engagement of Australian companies with capabilities in tailings management, environmental risks and water management solutions.
The Brazilian mining industry is expected to invest approximately US$53.6 billion between 2014 and 2018. ).
Opportunities
With the expansion plans for the Brazilian mining industry, particularly iron ore projects, there is a wide range of opportunities for Australian companies.
Opportunities exist in:
- mineral exploration – geophysics, mapping, drilling, blasting
- mining software – resource estimation, modelling, mine design and planning, maintenance and optimisation
- automation and robotics
- contract mining and engineering services
- environmental equipment and consulting
- mining processing technologies
- mining equipment
- mine safety
- mining education and training services
- mining research and university collaboration
- communities engagement consulting.
Australian mining presence in Brazil
As of December 2016, Austrade is aware of 31 Australian companies in the Brazilian mining market including:
- 13 mining companies with projects in various phases of development, from early stage junior miners to development and production
- 15 Mining Equipment, Technology and Services (METS) companies that have set-up a subsidiary office
- three METS companies contracted a local distributor.
Marketing your products and services
Market entry
Austrade strongly recommends that exporters obtain professional legal and accounting advice before conducting any business in Brazil. Austrade can provide referrals to service professionals.
A sound business plan, a long-term strategy and some degree of local presence are likely elements of success in Brazil. Important points to consider include:
- Local business presence – agent, representative office or joint venture partner:
- For most exporters it is necessary to establish a local presence through an agent/distributor, representative office or joint venture partnership. To maintain business contacts or where regular sales or service follow-up is required, it is critical to be on the ground.
- Brazil has a large choice of reputable sales agents, which are a popular way for new exporters looking to develop a market presence, particularly for smaller companies. The challenge is to find an agent with the right contacts and experience for your product.
- A smaller number of exporters establish representative offices, due to the high costs involved. These companies usually have needs that cannot be met by agents or distributors, such as businesses that need a high degree of control over their products and after-sales service, or have commercially sensitive intellectual property.
- One option that is increasingly popular is the establishment of a joint-venture partnership with a local company. An attraction of this method is that costs and risk are shared by the partners, with the Brazilian partner bringing to the venture local market knowledge, expertise and business experience.
- Strategies to deal with administrative and legal requirements, including tariffs and taxes.
- The likely need to localise manufacture of the product at some stage.
- Understanding the structure of Brazilian mining companies and their procurement processes.
- The need to develop relationships with procurement offices, as well as with operation teams at mine sites.
- Presenting a concrete value proposition which demonstrates the value add of your solution.
- Understanding that there is a lot of bureaucracy involved in site visits and long driving distances from regional mining centres such as Belo Horizonte and Carajás
(20min delay)
