Edition nº 26
The metal's future
The world's sixth largest aluminum producer, Brazil has recovered the results from before the economic crisis and attracts investments of domestic and foreign companies seeking to meet the increase in demand in coming years
With a growth outlook of about 25%, one can say that 2010 will be a promising and a recovery year for the aluminum industry in Brazil. The news then is encouraging because notwithstanding revenues of US$ 13.3 billion, which ranks the country sixth among the world's largest producers of the metal, this market in 2009 reflected the instabilities generated by the global economic crisis. According to data of ABAL - The Brazilian Aluminum Association, in comparison with 2008, for example, a decrease of 10.5% occurred in domestic consumption of transformed products and a 51.2% decline in exports of bauxite, the main mineral used to produce alumina and then aluminum metal.
Albeit the decreases, specialists predict a good phase for the industry beginning this year. Data of a study by FGV - The Getúlio Vargas Foundation shows that the 5.6% average annual growth rate of the GDP is expected to cause an annual increase between 6.6% and 9.1% in demand for the metal in Brazil. Thus, one expects that domestic consumption, nowadays at the one million ton mark, corresponds to between 2 and 2.6 million tons in 2020 – i.e., it will more than double in the next ten years. For the president of ABAL, Adjarma Azevedo, the civil construction, packaging and transportation industries will contribute the most to this result.
Fernando Garcia, a consultant at FGV, points out some of the challenges that have yet to be overcome and mentions that primary aluminum production in the country "must be fostered and expanded to 760,000 tons/year". Regardless of the Brazilian production potential – the national bauxite reserves are the third largest in the world – the high production costs, particularly of energy, have adversely affected competitiveness and made it impossible to grow the number of primary aluminum producers. Investments in the industry nowadays are mostly concentrated in improving the production process", explains Azevedo.
In the next 10 years domestic aluminum consumption is expected to double in Brazil
Electric power is one of the main inputs in the primary aluminum industry, representing up to 45% of the end price. Currently, the industry on average is operating using 33% of self-generated power, but the effort is not always sufficient. The global crisis caused significant reductions in production levels. According to ABAL, the Valesul plant, in Santa Cruz (State of Rio de Janeiro), with a production capacity of 95,000 tons, was closed in April 2009; Novelis stopped alumina production in Ouro Preto (State of Minas Gerais) in May of that same year; and the Alcoa plant in Poços de Caldas (State of Minas Gerais) reduced primary aluminum production by 30%.
In light of this scenario, the way out for many companies in the industry has been to transfer investments to other countries, where production costs are lower. In Azevedo's opinion, however, the strategy to reverse this scenario is the responsibility of the government. "It is necessary to invest in clean and competitive sources, such as biomass and hydroelectricity, and to implement a policy to assure the industry's access to energy at affordable prices", he argues.
EXPANSION PLANS – Rather than wait for new crises, domestic and foreign companies are investing in the industry. An example is Rio Tinto Alcan, whose history developed in parallel with the aluminum industry in Brazil. In 1950, then Canadian-owned Alcan became the first multinational corporation to participate in the Brazilian market. Nowadays, apart from activities in mining and in the global supply of bauxite, alumina and aluminum, Rio Tinto Alcan holds a 10% participation in the production of alumina by the Consórcio de Alumínio do Maranhão (Alumar), one of the world's largest primary aluminum production facilities. "We invested about R$ 500 million in Alumar's most recent expansion, doubling its production capacity", says Ronaldo Ramos, president of Rio Tinto Alcan in Brazil.
A global leader in rolled aluminum and in beverage can recycling, Novelis will, until 2012, invest US$ 300 million in the expansion of rolling operations in Pindamonhangaba (State of São Paulo), increasing the production capacity by 50%. Another R$ 15 million are earmarked to expand the can and other aluminum products' plant capacity by 150,000 to 200,000 tons of ingots per year. "To improve our recycling capacity and the flow of molten metal will allow increasing the ingot capacity to 20% while reducing purchases from third parties", says Alexandre Almeida, president of Novelis South America.
The country's largest primary aluminum manufacturer, with a production volume of 475,000 tons, Companhia Brasileira de Alumínio (CBA), of Votorantim Metais, is also aiming at expansion. "We plan to increase our production capacity by more than 100,000 tons, in 18 months", reveals Marco Antonio Palmieri, director of aluminum business at Votorantim Metais. The initiative includes a new anodization line, in what is a process that makes aluminum more resistant.
Civil construction, packaging and transportation expand the aluminum business
Luiz Carlos Loureiro Filho, CBA's commercial director, observes that Brazil, by 2015, is expected to grow more than 10% per year. "Events such as the World Football Cup and the Olympic Games are expected to contribute to increasing aluminum consumption", predicts the executive.
To maintain competitiveness, CBA will further expand its power generation capacity – that currently corresponds to 80% - with own means. Furthermore, the company is preparing to enter the recycling market. "We recycle material in our plant and we are assessing whether to enter this business more strongly", states Palmieri.
Among the primary aluminum producers, Albras – Alumínio Brasileiro, located in the State of Pará, is the second largest in the country and ranks among the 15 largest in the world. The company supplies the market with ingots and because it is close to a large bauxite reserve in the Amazon region, in Tucuruí, it exports about 93% of its production to Asian and European markets.
The remaining 5% are sold as metal to Alubar, an aluminum electric cable and rod manufacturing plant. Luis Jorge Nunes, industrial director at Albras, says the objective is to increase the production capacity to 467,000 tons/year by 2015, with investments in sustainable development and the permanent improvement of processes and research.
The industry, attracted by the growth potential, and with the interest of Canadian companies such as Mecfor, offers the aluminum producers technology. "Our business is to produce equipment and solutions to help other manufacturers reduce costs in the metal's transformation process", says Danny Savard, vice-president of business development at Mecfor. For this executive, the time is ripe for prospecting new clients, which is why he has come to Brazil four times this year alone. "We believe in the Brazilian economy and in the positive and dynamic attitude of most representatives of this business in the country". In practice, according to Savard, one of the opportunities for partnering may involve the production of equipment for the railroad industry.
ABAL data shows that the domestic consumption of transformed aluminum products is expected to grow 24.7% in 2010, having totaled 298,800 tons consumed in the first quarter, the equivalent to an increase of:
32,3% in comparison with the same period in 2009
7,6% in relation to the last quarter of the previous year
Translation to English: BeKom Comunicação Internacional