Roskill reports that Paranapanema – Brazil’s only copper smelter-refinery – just published its third quarter results for 2018, and they offer some cautious signs of optimism. Output of cathode was broadly unchanged at 103,000 t in the year to September compared to the same period of last year. Its smelter in Dias d’Avila, Bahia state, was shut down for 35 days of scheduled maintenance over March to April 2018, however, so without this, a substantial increase would have been achieved. Aside from processing more of its cathode internally to make wire rod and drawn wire, the Group’s strategy is now focused on exporting more refined copper overseas.

The company’s production of wire rod and drawn wire expanded by a healthy 7.8% year-on-year in Q1-Q3 2018 to 76,000 t against 70,000 t in the prior year. Paranapanema’s strategy for its rod and wire business is now to sell more domestically rather to chase lower margin export sales. It aims to expand its home market share and regain customers that it lost during the economic turmoil of the past couple of years. The group’s brass mill products output rose 4.8% year-on-year to 31,000 t relative to 29,000 t in the same months of 2017. These operations are located in Santo Andre, Sao Paulo state and include a new high margin 150 t/month copper air conditioning and refrigeration tube line commissioned last year.

Roskill view: “The Brazilian economy slumped by 3.6% in 2016 and managed meagre growth of just 1.0% in 2017. The State Bank had forecast a 2.6% expansion for 2018, but it cut its projection to just 1.6% mid-year due to the widespread impact of a nationwide truckers strike in May which severely dislocated transport logistics in almost all sectors of the economy. More recently, the economic stress in Argentina has adversely affected Brazil as it is one of its most important trading partners. Some end use sectors are performing strongly, however, with vehicle production up 10.5% year-on-year to 2.2 million units in Q1-Q3 2018. Domestic registrations are growing even quicker but exports are now falling. Even so, enamelled wire demand is growing strongly for electric motors for the auto industry and the home appliance sector.

“Far right politician Jair Bolsonaro won the presidential election run-off on October 28th. Will he be any more successful than previous leaders in solving the endemic problems of adequate education, inflation control, crime prevention, infrastructure development, electricity provision and the many constraints that hold back the Brazilian economy?”