The slow growth in Brazilian iron ore ::Macquarie Research,

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The slow growth in Brazilian iron ore
Feature article
 Brazilian iron ore export data for the first half, while up 5.6% YoY, was below
expectations. We expect a strong second-half recovery in exports (mainly to
China), and total Brazilian exports are forecast to reach 320mt in 2011, up
14mt YoY.
Latest news
 Base metals continued their upward push on Tuesday, with aluminium and tin
leading the way with 2.6% and 2.8% gains, respectively. Copper also closed
back above $9,500/t, as output at Collahuasi, the world’s third-largest copper
mine, was impacted by heavy snow in Chile.
 Ma’aden and Alcoa have secured further financing toward their JV bauxite
mine and alumina refinery in Saudi Arabia. We expect the 2mtpa alumina
facility to be operational from mid-2013 as part of the integrated complex
that will also incorporate a 740ktpa aluminium smelter and 380ktpa rolling
mill. We model full operational capacity being reached in 2015.
 Tepco appears likely to settle July calendar-year contracts at $127.50/t,
down slightly from the April contract but above current spot pricing. Our
understanding is that delivery of tonnes under this contract will not
commence until October.
 Reuters has reported that Japan's Nippon Steel Corp resumed supplying on
Friday the 136 megawatts of power that it is contracted to provide Tohoku
Electric Power by restarting a coal-fired power unit closed since port
infrastructure was damaged during the March tsunami. At the recent
McCloskey Coal USA conference in New York, Shin Niwa from IHS noted that
every 1 degree increase in temperature in Japan will add 0.8GW to power
demand, while the Tohoku Electric Area is likely to have a 4% shortage in the
summer under usual demand conditions.
 Steel Business Briefing's 3Q survey of Chinese steel mills highlights the
declining sentiment in the sector. A weakening of manufacturing activity is
now starting to affect mills' outlook, with 64% of those surveyed predicting a
sequential drop in domestic steel demand in 3Q while only 10% anticipated
a rise. Meanwhile, 50% of participants foresee a 0–5% drop in Chinese
crude steel output (though only 27% saw such falls at their individual
facilities). Exports were also predicted to drop by 63% of those surveyed.
These overall results are in line with our expectation that Chinese crude
steel output is likely to pull back to 675mtpa in 3Q, with reacceleration
through September.
 A new railway linking the Naomaohu coalfield in Hami with the Lanzhou-
Urumqi line is planned for completion by 2013. The 445km project will cost
RMB9.6bn, according to the China Coal Times, and will be capable of
transporting 40mt/year. This is aimed at boosting thermal coal supply from
Xinjiang in the northwest of China, which is the largest untapped coalproducing
region in China.