BRAZILIAN ALUMINUM - solutions for sustainable living

BRAZILIAN ALUMINUM SOLUTIONS FOR SUSTAINABLE LIVING 12 CHALLENGES AND OPPORTUNITIES FOR THE ALUMINUM INDUSTRY IN BRAZIL Challenges and opportunities for the aluminum industry in Brazil 2.1. Growth constraints for demand in the short term Though Brazil gathers paramount competitive advantages such as high-quality bauxite and clean and renewable energy, for it to produce aluminum and leverage the advancement of a diversified manufacturing and high added value chain, the country has lost competitiveness. The elevated energy cost is the major cause behind such context due to macroeconomic factors, growing duties and lack of a long-term policy for the sector. The industry has walked the way of a recessive environment which the country has gone through since 2015, a year when key indicators dropped, deepened by the political crisis that has existed since then. For the third year in a row, the domestic demand for processed aluminumproducts has shrunk, closing 2016 with a consumption of 1,205 thousand tons against 1,512 thousand tons in 2013. Similarly, the processed aluminum production moved from 1,451 thousand tons in 2013 to 1,212 thousand tons in 2016. Nonetheless, in what comes to the initial stage of the production chain, there was positive performance with production of bauxite and alumina hitting records, with increments of 5.9% and 4.2%, respectively. Exports for those products were another record and also accounted for showing positive figures in the sector’s balance of trade. With increased demand for processed products and cut-down in primary aluminum production capacity, Brazil has become an importer for the metal, which has then undermined the competitiveness of the entire chain. Away fromsigns of change in such scenario, the country will remain a net importer of primary aluminum until the conditions of profitability help justify resuming the existing idle capacity. 2.2. Energy and bauxite: key factors for balancing strengths in the global context Historically, the availability of raw materials and energy has favored investments for installing aluminum production capacity in regions where such competitive conditions are present. 2