Rail traffic signals potential slowdown for Brazilian iron ore

As we wrote recently, watching transportation data for a commodity producer like Brazil can provide deep insights into the performance of the economy. Mining, agriculture and other sectors all depend on Brazil's road and rail networks to get their products to domestic customers and ocean-going vessels at port.

This week, we turn to a key ingredient for steelmaking: iron ore. Production might be topping out, according to railway cargo traffic figures recently added to the CEIC platform. This data can serve as an alternative to the country’s industrial production index for mineral extraction (which covers both mining and oil).

The volume of iron ore transported by rail from the two main producing states, Minas Gerais and Para, remained more or less stable in the five months through August, according to a 12- month rolling sum.

This likely reflects two conflicting trends. Iron ore exports from Brazil have risen significantly -- reaching 32.8 million tons in September, just shy of the record 33.2 million tons set in February 2019.

However, on the domestic demand side, Brazil's steelmakers have been concerned about competition from imports, accusing foreign producers of "dumping" -- i.e. selling steel in Brazil below the market price in a producer's home market. In September, domestic steel production was 2.7 million tons; that's 10% below the all-time peak of 3 million tons recorded in November 2021.

In the 10 years to August 2024, the volume of iron ore transported by rail grew by 50%. Much of this production originated from Minas Gerais (whose name translates as "General Mines").

The 120-year-old Vitória-Minas Railway (EFVM) experienced a threefold increase in iron ore cargo traffic, soaring from 9 million tons since mid-2014 to nearly 28 million tons, as our second chart shows. MRS Railways boosted its cargo by 10 million tons, reaching a total of 76.4 million tons; the Carajas Railway in northern Para and the Centro-Atlantica Railway in Minas Gerais both saw increases of 5.5 million tons, bringing their totals to 8 million tons and 7.2 million tons, respectively.

If you are a CEIC user, access the story here.