TRADE & COMMODITIES
Alcoa plans to re-open its smelter in Sao Luis, to help with the increased demand.
Brazil anticipates a bumper year
Patrick Knight
FEBRUARY 2022
www.drycargomag.com
Developments worldwide favour Brazilian commodities
DCi 4
With concern about the impact global warming will have on the health of the planet rising sharply in the wake of the climate conference in Glasgow, the majority of the commodities Brazil exports to the world, are likely to be affected, most of them positively, writes Patrick Knight. Brazil anticipates a 2021/22 grains crop of 289mt (million tonnes), which would be 14% more than in 2020/21. This is mainly explained by an area increase of 3.6%, taking the total area planted to grains to 71.5 million hectares. Yields should also be up by 10% in 2022, to average four tonnes per hectare. This increase is mainly due to the weather during the 2021/22 planting season being more favourable this season than last, which was extremely dry. This year’s soya crop is expected to come in at about 141mt. The price received by Brazilian farmers for their beans has increased by up to 47% in recent months. This has been partly because of the substantial rise in the price of fertilizer, the great majority of which is imported. The sharp fall in the value of the Brazilian currency, the Real, against the US dollar, means farmers have had to pay much more for their fertilizer. The price of urea has increased by 70% in the past year, that of phosphates is up by 75%, while that of potassium is up by 150%. The price of farm chemicals, notably pesticides and
herbicides, is up by 120%. The high price of fertilizer will prejudice the profitability of the soya sector this year. A total of 21 million hectares are due to be planted to maize 2021/22 and a crop of 116mt is expected this year, 33% more than in 2021. Eighty-six per cent of the maize will come from the second crop. This is the grain planted after the early soya crop has been harvested. Again, the high cost of fertilizer is expected to prejudice the profitability of maize.
THE ALUMINIUM COMPLEX Alcoa’s smelter in Sao Luis, Maranhao state, which was shut down in 2015, is scheduled to re-open early this year. Refurbishment there will cost Alcoa US$75 million. In an initial phase, 268,000 tonnes will be made this year by Alcoa. This compares with the 450,000 tonnes which was made at the Sao Luis plant before much of it was shut down six years ago. Since 2015, 788,000 tonnes of Brazil’s primary aluminium capacity has been mothballed. The Industry’s trade association, Abal, expects that 450,000 tonnes of this capacity will eventually come back on stream, spurred by soaring metal prices. The industry is now making about 910,000 tonnes of primary each year. In 2020, 2.42mt of primary aluminium was used in Brazil. When the Sao Luis mill starts up again, Alcoa’s share of the primary
made in Brazil will have increased to 60%. The fate of the remaining mothballed capacity will depend on market forces, as well as on the condition of the mothballed equipment. Alcoa suggests that its remaining capacity could come back on stream by 2024. If this does happen, Brazil could soon have returned to self-sufficiency in primary aluminium. As Abal points out, Brazil has major reserves of high quality bauxite and adequate supplies of alumina. The Brazilian Aluminium Company, CBA, Brazil’s leading integrated aluminium producer, aims to soon be producing 100% green energy at its mills. CBA says it is now investing in wind and solar energy, while at the same time selling much of its hydro capacity. CBA also plans to greatly increase the amount of re-cycled aluminium it uses. To this end CBA has spent $20 million buying the facilities of the Alux company. CBA now incorporates 30% of re-cycled aluminium into the total of primary it makes. The company plans for the amount of re-cycled aluminium it uses to have risen to 40% of the total in the near future. If re-cycled aluminium is used to make the primary product, only 5% as much energy is needed as when alumina is used. The CBA company plans to spend $400 millions on modernizing all its facilities by 2025. This will result in its
