Brazil: Why the primary aluminium industry could become a target for investors from across the globe
As the fifth largest country in the world, occupying half of the entire Latin American land mass, Brazil is certainly an unmissable force in global industry. This is most definitely the case in terms of primary aluminium production, where Brazil sits in eighth place in the worldwide rankings for quantity produced, and therefore presents a market worth exploring in greater depth. In terms of the predominant sectors making up the largest part of the Brazilian economy, mining and manufacturing find themselves in this category. Therefore, if you are looking to convert some of your capital assets into investments in new markets this year following the COVID-19 pandemic, perhaps the Brazilian aluminium industry is for you. In today’s article, we will not be providing financial advice, but rather exploring some background to the market in the Latin American nation as well as some of the benefits that could arise from investment.
Now, you may not be familiar with this industry or what primary aluminium production even is, but there is no need to panic. Before we get into specific details, we will outline this for you:
Primary aluminium production is where aluminium is obtained from electrolytic cells during the energy intensive process of electrolytic reduction of aluminium oxide. This sounds complicated, and in many ways, it is, however, in easier terms to digest, means producing aluminium metal from powder by means of chemical reaction.
With this understood, we can explore the industry itself a little more, starting with the biggest Latin American producers of primary aluminium, as this has been a dynamic market over time leading to where we are today. In the past, Venezuela wore the crown for this title, however, with the large economic implications involved with the aluminium production industry, the nation could not maintain its position. This left a gap to be filled, and both Brazil and Argentina have risen to assume the position of market leaders, represented by the top three regional producers, as of the beginning of 2021, featuring one from Argentina and two from Brazil, one of which is the Companhia Brasileria de Aluminio (CBA), and will become a focus later on.
One of the most important things to consider for would-be investors is the numbers. This is to say, current market conditions and future projections, and in 2019 alone, the market in Brazil for aluminium reached US$2.2 billion. The already high value from a couple of years ago demonstrates the potential existing in the area, and this is reinforced by the market value estimation for 2027 of US$4.1 billion, almost doubling in under a decade with a Compound Annual Growth Rate (CAGR) of 4.4%. This market expansion can be attributed to a number of factors, including increased demand and also development taking place in many Brazilian industry sectors.
For a prospective investor, this information above presents an interesting predicament, one which displays an ideal landscape for healthy returns. Though, at the same time it is worth keeping in mind the COVID-19 pandemic and looking to longer term potential in the primary aluminium production market in Brazil, as current conditions do not necessarily reflect the future development that could take place once long lockdowns end and vaccinations are made more widely available.
One of the factors to consider when looking to the long term is sustainability. As we mentioned before, the Venezuelan domination of the Latin American aluminium industry came to an end when economic demand became unsustainable, and that production of aluminium is also extremely energy intensive. Taking these ideas into account, sustainability is a key feature to be incorporated into the process, and Brazil is already getting involved. The company CBA that we mentioned before is the epitome of this, as not only is it one of the largest primary aluminium producers in Latin America, it is also one of the most ambitious to become environmentally friendly. They are committed to a ‘Science-Based Target’ to limit global warming to 1.5°C, and producing 480,000 tonnes of aluminium per year, as well as taking care of every step of production themselves, this is certainly positive news. They also generate their own energy and make use of industrial recycling, making CBA a potential role model for other companies in Brazil and the region as a whole, and attracting more investment.
So, if you are interested in finding out more, contact us today! At Creimerman, our team of professional global citizens would be happy to help you with your personal or professional cross-border ventures and help make them a success.