Brazil iron ore supply summary
2021 saw Brazil’s production volumes increase by 7.5% as operations gradually ramped up following the tragic Vale dam burst at Brumadinho in 2019. Furthermore, the world’s lowest-cost and second-largest exporting country saw its cash margins expand by 55% last year as a result of historically high iron ore prices. In 2022, we expect production and margins to trend in opposite directions. While margins are set to contract on the back of lower iron ore prices, output from Brazil is poised to grow thanks to higher output from Vale’s flagship project, S11D. In addition to lower iron ore prices, an 18% hike in costs is set to dampen margins this year as a result of mounting inflation, growing oil prices and an appreciated Brazilian real. Healthy margins and increasing seaborne demand for Brazil’s high-grade products have emboldened suppliers in the country to invest in growth capex. Vale's S11D and CSN’s expansions are two of the most important projects driving capital expenditure now.