Boston, MA -- (ReleaseWire) -- 04/29/2014 -- With the boom years over and our expectation for Chinese metal demand growth to slow, we expect Brazil's mining sector to see slower average growth rates through 2018 compared with previous years. The country's large untapped reserves and relatively small mining sector relative to the larger Brazilian economy will allow for growth opportunities though, and we expect production gains for both domestic and foreign producers. Iron ore will drive sector investment, but both base metals and gold will see continued interest.
We expect mine output to grow through 2018 despite our forecast for metal prices to either average lower or see relatively minimal growth. Of greatest salience to the Brazilian mining sector is iron ore, which we forecast will average US$115/tonne in 2014 and US$105/tonne in 2015, lowering the value per unit of mined output. Still, we expect iron ore miner Vale to increase output given both that its cash costs range between US$30-50 per tonne and shipping costs to China, while comparatively more expensive than iron ore from Australia, remain competitive.
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Crucially though, we forecast a secular downward trend in iron ore prices through 2018. Since iron ore makes up around 85% of the country's total mining export value, our iron ore price forecast underpins our expectation for slower sector growth in the years ahead. We believe Chinese economic growth will trend lower as steel-intensive fixed asset investment shifts to more domestic consumption. Brazilian iron ore producers, heavily exposed to China, are likely to see demand growth slow.
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