Brazil is a massive country, covering almost half of the area of South America. Its industries are well developed and its large cement industry is still growing rapidly. Such growth looks set to continue and may accelerate ahead of substantial government infrastructure projects and work for the 2014 FIFA World Cup and 2016 Summer Olympic Games.
Introduction
Brazil, by far the largest country in South America, and the fifth largest in the world, is also the world's fifth most populous country.1 As of 26 December 2011 it reportedly had the sixth largest economy in the world, overtaking the UK at the end of the year.2
The country is not short of money, which has helped give rise to vibrant industrial and technological sectors, a highly-developed infrastructure and a large cement industry. However, its wealth, much of which stems from its natural minerals and oil, is very unevenly distributed among its 203.4 million inhabitants.2 The country suffers from very wide social and economic inequality, ranking 10th from bottom on an index of household income equality in 2011.3 As is the case around the world, where rich and poor are in close proximity, high levels of crime follow, especially in the larger metropolises such as Rio de Janeiro and São Paulo.
History
From the 1500s onwards Brazil was a key constituent of the Portuguese Empire. It even played host to the Portuguese King João VI after France's Napoleon attacked Lisbon, invading Portugal in 1808. After 13 years in Brazil, João returned to Portugal, leaving his son in place as a new King. The Brazilian monarchy continued until a military coup forced the abdication of King Pedro II in 1889.
By 1930, power had gradually passed to politicians and Brazil became a republic for the first time. A second coup in 1964 returned power to the military until it ceded power peacefully for a second time in 1985.
Throughout the 20th Century, Brazil adopted a policy of non-confrontation on the world stage, to the point where it could be described as insular. It had very little involvement in the World Wars, although it sided with the Allies each time. This policy of non-confrontation (unless directly threatened) continues to today.
Economy
The GDP/capita graph below shows the end of a period of stagnation for the Brazilian economy that coincided with the end of military rule in 1985. While it was caught up in the recession of the early 1990s, Brazil boomed in the mid-1990s before falling victim to the spread of the Asian banking crisis in 1999 and then an economic hangover from neighbouring Argentina's financial crisis in 2000.
Since 2002, however, the country has entered a period of very rapid economic growth. This has been in part due to Brazil opening up to outside investors. Its GDP/capita has more than tripled in less than a decade and GDP growth continues to be strong.5
Decade | New factories |
1930s | 5 |
1940s | 5 |
1950s | 16 |
1960s | 9 |
1970s | 24 |
1980s | 6 |
1990s | 6 |
2000s | 16 |
Above: Number of new cement factories commissioned in Brazil per decade since 1930.6
Cement industry
Introduction
The Brazilian cement industry began at the end of the 19th century, but it was not until the 1930s that it began to properly flourish with increased emphasis on industrialisation.6 Five new cement plants were established in the 1930s and before long the country was nearly entirely self-sufficient in terms of cement. In 1936, the fledgling industry set up its own association, the Brazilian Association of Portland Cement (ABCP).
In the 1940s, another five factories began production as the industry grew steadily but it was the building of the new national capital in Brasilia in the 1950s that encouraged the industry (and industries in general) to move inland, with the mid-west and northern parts of Brazil open to development for the first time.6 Cement plants were among the first developments at new sites. In 1952 the National Union of the Cement Industry (SNIC) was set up. By the end of 1959 another 16 new factories had started production.6
After the inauguration of Brasilia, Brazil entered a prolonged economic crisis in the 1960s, leading to significant overcapacity in the cement industry. This situation was then more than reversed in the 1970s, when a record 24 new plants came on stream, all of them dry process.6
The 1980s were again a time of economic instability, which caused retraction and overcapacity in the industry. Just six new plants were commissioned in the decade. This situation was again reversed in the 1990s, due to new economic policies. Cement consumption rose to an all time high and the industry began to conduct its first investigations into the use of alternative fuels. As sustainability moved up the aganda, the remaining wet process plants were replaced with dry plants or shut down. Heat recovery systems and pre-heaters also became more common.6
In the 2000s a further 16 new cement plants were added, additive use intensified and co-processing of wastes increased. A civil construction crisis in the first half of the 2000s was reversed in the second half of the decade, with a return to spending on housing and infrastructure projects, such as the forthcoming World Cup and summer Olympic Games.6
Today
At present the Brazilian cement industry is dominated by Votorantim Cimentos, which has 20 plants out of 72 plants and projects under construction in the country.4 The major multinationals are represented to a moderate extent, with Lafarge (six plants) and Holcim (four plants) present throughout the country.
The Portuguese group Cimpor has six plants in the country, but HeidelbergCement and Cemex do not have any integrated facilities.
The rest of the industry is represented by local players in the form of the multi-sector construction giant Camargo Corrêa under the brand InterCement, and smaller producers such as Cimento Tupi, Mizu and the steel producer CSN, a recent cement market entrant.
Above: Map of Brazil showing major settlements, neighbouring countries and areas of water and integrated cement plants.4
(click on the map to open the full-sized version with key)
GDP (2010)1 | US$2.08tn |
GDP/capita (2011 est.)1 | US$11,854 |
Population (July 2011)1 | 203.4m |
Offi cial oil reserves1 | 14.2bn barrels |
Area1 | 8,514,877km2 |
Integrated plants4 | 72 |
Integrated capacity4 | 55.66Mt/yr |
Average plant capacity4 | 0.77Mt/yr |
Table: Summary data for Brazil, its economy and cement industry.
Green credentials
Brazil's cement industry is currently one of the most advanced in the world. It had average CO2 emissions per tonne of clinker as low as 580kg/t in 2009, similar to the South American average and ahead of Europe, the USA, Japan, Australia and New Zealand.6 In 2010 it was revealed that the industry also had the lowest potential for energy savings compared to best-available equipment in 2006 of any domestic cement industry.6
By looking at cement consumption data for Brazil, it is possible to speculate why the industry is so well placed in terms of energy-efficiency. Firstly, cement consumption has increased six-fold since 1970. It tripled from just 9Mt/yr in 1970 to 27Mt/yr in 1979 and then did not expand greatly in the 1980s.6
This enabled consolidation of older capacity before a set of newer and more efficient plants came in in the 1990s, with consumption increasing by 16Mt/yr from 1990 to 1998, when consumption hit a high of 43Mt/yr. The early 2000s financial crises reduced cement demand in Brazil to 35Mt/yr by 2003, but since then another wave of new capacity has come online to satisfy 60Mt/yr of consumption by the end of 2010. The new plants in the 1990s and 2000s, most of which are highly-efficient, now form the bulk of the Brazilian cement industry.6
Recent growth
In 2011 the Brazilian cement industry grew by 7.3% in terms of sales compared to 2010. The country produced around 63.5Mt of cement according to preliminary results posted by the Sindicato Nacional de Cimento (SNIC).
When imports are added to domestic production, cement consumption increased slightly to just over 64Mt. Consumption was triggered by growth in lower income classes, increasing availability of credit, infrastructure works and housing programmes.
So strong was domestic demand for cement in Brazil in 2011 that a large increase in imports was registered. Imports of cement and clinker reached 2.2Mt between 1 January 2011 and 30 September 2011, an increase of 74% over the same period in 2010. The total value of imported cement was US$135m between January and September 2011, compared with just US$80m from the same period in 2010.
Meanwhile, exports from Brazil have fallen by a factor of 17 in the past three years, dropping from 515,000t/yr in 2008 to just 36,000t/yr in 2010. At the end of 2011 it was estimated that the country's production capacity was around 80Mt/yr.
Cartel accusations
Over the years the Brazilian cement industry has been accused of a number of uncompetitive practices including price-fixing cartels. The most recent cartel accusations stem from February 2007, when anti-competition authorities made a series of raids against cement producers up and down the country. They had apparently been tipped off by evidence from an ex-Votorantim employee.7
Eight producers, including Votorantim Cimentos, Camargo Corrêa Cimentos (now InterCement), Lafarge and Holcim, which held a total of 93% of the domestic market, were accused of fixing prices and were threatened with fines of up to 30% of their 2005 revenues, the year that the accusations concerned.7
Five years later, however, and little further action has been taken against the companies concerned. Much of the evidence was seized by a judge in 2007 after the producers claimed that the material held was 'commercially sensitive.'7
In November 2011 the issue was raised again by the Brasilia-based Secretaria de Direito Econômico (SDE), which accused six major manufacturers of trying to push others out of business by uncompetitive practices ahead of World Cup and Olympic construction.8
History of cartels
An in-depth study looking at general cartel-like behaviour in Brazil conducted from the 1990s found that normal barriers to trade such as distance had not been in operation in the Brazilian cement industry. The study also found that cement sales in some states were overwhelmingly dominated by their state suppliers.7
For example, it was found that in the adjacent north eastern states of Alagoas and Sergipe, which both had a single producer at the time of the study, the two producers dominated their respective states' cement market despite trade between the states being easy and common. Indeed, it was observed that the producer in Alagoas had an 83% share in that state but did not sell in Sergipe, despite shipping to states further away. This trend was repeated in the more southerly states of São Paulo and Minas Gerais with a larger number of producers.7
Due to the low barriers to transport in Brazil, a low value product and little brand-loyalty, it was hypothesised by the authors of the study that a number of small cartels were operating for many years prior to the investigations in 2007. The same study interestingly noted that the number of cement manufacturers in Brazil declined by nearly a third from 19 to 12 between 1991 to 1999.7
Social responsibility
Many producers in the Brazilian cement industry have social responsibility projects at national or local levels. Votorantim Cimentos, for example, invests around US$3m/yr in social programmes and activities, focusing on communities in the areas in which it operates and paying special attention to youngsters aged 15-29 from low-income families.10
In 2010, the Camargo Corrêa Institute, set up by the Camargo Corrêa Group, completed 10 years of operation. During this time it has assisted in around 150 projects, benefitting some 83,000 people. In 2011 the group set up a US$28m fund to help young people into the labour market.11
Others take a different approach. The relatively small producer Cimento Tupi has run its SOS Queimados project for four years.10 The project has taught over 5000 primary school children environmental responsibility and covers awareness of preventing forest fires, water conservation, ecosystems, the greenhouse effect and how to treat wild/endangered animals.12
Cementing the future
As mentioned elsewhere in this review, the Brazilian cement industry is currently on an upward trend, with demand rising dramatically between 2003 and 2011. In 2012 it is expected that demand will continue to improve as construction continues for Brazil's forthcoming World Cup and Olympic hosting duties in 2014 and 2016.
The gains that can be made by the industry in the coming years are obvious. With strong ongoing demand and efficient production methods, Brazilian producers are in a good position to maximise their margins but they should also be careful not to artificially add to these by way of cartels or or illegal market-sharing agreements.
References:
Note: Websites accessed 24 - 26 January 2012.
1. CIA World Factbook, 'Brazil.' https://www.cia.gov/library/publications/the-world-factbook/geos/br.html.
2. BBC website, 'Brazilian economy overtakes UK's. says CEBR,' 26 December 2011, http://www.bbc.co.uk/news/business-16332115.
3. Vision of Humanity website, 'GINI-Coefficient,' http://www.visionofhumanity.org/gpi-data/#/2011/gini.
4. 'Global Cement Directory 2012,' PRo Publications International Ltd., Epsom, UK, October 2011.
5. World Bank Databank website, 'GDP per capita (current US$),' http://data.worldbank.org/indicator/NY.GDP.PCAP.CD.
6. Sindicato Nacional da Indústrial do Cimento, 'Relatorio 2010,' http://www.snic.org.br/pdf/snic-relatorio2010-11_web.pdf.
7. Oleck, J. 'Concrete Collusion - Economic data reveals little competition in Brazil's cement industry,' October 2011, reporting on the work of; Salvo, A. 'Trade flows in a spatial oligopoly: Gravity fits well, but what does it explain?' Canadian Journal of Economics, 43(1), pp. 63-96, 2010. http://insight.kellogg.northwestern.edu/index.php/Kellogg/article/concrete_collusion.
8. Revill. J.; Wall Street Journal website, 'Holcim denies Brazil probe charges,' 11 November 2011, http://online.wsj.com/article/SB10001424052970204224604577031622248424572.html.
9. Hurrel, F. The Rio Times website. 'Rio favela population largest in Brazil: Daily,' 23 December 2011.
10. Votorantim Cimentos website, 'Social,' http://www.vcimentos.com.br/htms-enu/Responsabilidade/Social.htm
11. Camargo Corrêa website, '2010 Annual Report,' http://rao2010.camargocorrea.com.br.
12. Cimento Tupi website, 'Environmental and social responsibility,' http://www.cimentotupi.com.br/cimentotupi/Ingles/detInstitucional.php?codinstitucional=8.