Brazil’s 100mt (million tonnes)-capacity cement industry, the world’s fourth-largest a few years ago, has now fallen to being the seventh, after four years of a steep sales decline. The shrinkage was caused by the severe recession which affected Brazil, and which included a collapse of civil construc- tion, still almost at a standstill. Tens of thousands of completed, or semi-finished homes and offices still overhang the market, while the parlous state of state finances has prevented the start of dozens of planned major infrastructure projects.

Thirteen of the 100 mills owned by the 24 companies which form the industry in Brazil have been halted, six in the state of Sao Paulo, the country’s most developed state. The industry used less than half its capacity last year, and prices remain 14% below their levels of 2014, despite the fact that the cost of electricity, coke and the special paper needed to make the 50kg bags in which up to two thirds of the cement is sold, have all risen sharply.

The economy is now showing some signs of recovery, led by the strong performance of exports — such as the strengthening price of most agricultural goods, as well as pulp. It is hope that this, combined with the stabilization of the price of iron ore, will help the industry — which produced just below 54mt in 2017, compared with the 71.2mt of record year 2014 — to produce 1–2% more in 2018 than last year.

A bright spot is the continued fairly buoyant use of cement by very small scale users, who continue to expand and improve privately owned homes, aided by a fall in unemployment. Industry leaders warn, however, that the economy will need to grow by at least 3% a year for at least seven years, before demand returns to the levels of 2014. The peak year had been preceeded by 15 years of steady growth, which encouraged mills to invest.

With the outcome of key presidential elections to be held in November this year far from clear, there are worries that the present relative stability may not continue. Luis Ignacio ‘Lula’ da Silva, Brazil’s president for the eight years 2003–2011, is the prefered candidate of more than 80% of the electorate. Lula, as he is known, presided over a period of boom, possible because the previous president, Fernando Henrique Cardoso, had managed to tame the high inflation which had previously infected Brazil.

Lula raised the minimum wage paid to the majority of Brazilians by far more than inflation, pensions were raised by a similar amount, while a scheme whereby the very poorest had access to a ‘family wage’ was extended. Soon after Lula was elected, huge reserves of crude oil were discovered under deep waters offshore. Lula promised that the profits from this would be used to start a big investment boom for industry, as well as infrastructure. This got off to a fairly good start, but the new climate helped allow the corruption which had always affected Brazil, to gain enormous ground. Then the so called ‘car wash’ scandal not only caused Lula’s successor to be

impeached, it also caused the virtual collapse of Brazil’s state-owned oil company, Petrobras, and a large number of firms, notably in the construction industry, which had been awarded juicy contracts for inflated prices. Although Lula himself was not found guilty of corruption, he has been found guilty of receiving illicit funds for a luxurious apartment complex. Unless this conviction is set aside, Lula is unable to stand for election this year. The present government is far less popular than Lula ever was, however, and none of the other candidates is supported by more than a tiny proportion of electors. There have already been violent protests about the fact of Lula’s exclusion.

Brazil’s cement industry is formed of four very large companies, the most important of which is the Votorantim group, whose 28 mills in 16 states, can make 35mt a year. In second place is the Intercement group, owned by the Camargo Correa construction company, whose 16 mills, in nine states, can make 16mt. In third position is the group formed by the merger of the Lafarge and Holcim groups, which following some mill disposals, now has ten mills, in seven states, able to make 12.5mt. Fourth is the Nassau group, whose 10 mills are concentrated in the north east and north of the country, which had grown by more than average in recent years. Nassau has ten mills, in eight states, with capacity to make 8.5 million tonnes.

The Votorantim group, also important in aluminium and other metals, and until recently, Brazil’s largest producer of market pulp, whose eight mills could make eight million tonnes of market pulp, has recently sold its pulp holdings to the smaller Suzano. In future Suzano will produce virtually half

of the world output of pulp made from eucalyptus. It is not yet clear what Votorantim, which, like Intercement, already has several cement plants in neighbouring Latin American countries, as well as in the United States, will do with the proceeds of the sale. One option would involve the purchase of other cement makers in western hemisphere countries.

A major reason for Votorantim departure from the pulp industry, which is enjoying a period of record prices at the moment, is that the industry is very cyclical. Although civil construction is unlikely to emerge from its present difficulties soon, if only a few infrastructure projects go ahead, mainly aimed at cutting the cost of getting the cost of goods from where they are grown, or made, into ships, demand for cement could grow fast. Investments in building new railways, or upgrading existing ones, increasing the capacity of numerous ports, notably those in the north and north east of the country, and in improving the navigability of several rivers, and building new terminals alongside them should all boost the industry.