Brazilian mining sector faces volatility from rising freight and oil costs

Rising oil prices, increased maritime freight costs, and pressure on iron ore prices are creating divergent outcomes for Brazilian mining and steel companies.

Vale S.A. (VALE3) remains relatively protected due to its logistical structure, with approximately 75% of its exports covered by long-term contracts and a hedge for about 70% of its oil exposure through 2027. Despite this, Goldman Sachs estimates that if current levels of ore, oil, and freight persist, the company's EBITDA could be up to 15% below market consensus.

In contrast, CSN Mineração (CMIN3) and Usiminas (USIM5) face significant risks. CSN Mineração has seen substantial stock declines, dropping 18.75% in a single week, largely due to its full exposure to spot freight rates and iron ore prices falling below US$ 100 per ton. Analysts note that high maritime freight costs—reaching approximately US$ 40 per ton—and the long distance between Brazil and China compared to Australia further impact the competitiveness of Brazilian miners.