S&P: Delays in Brazilian iron ore projects caused by permit issues

The international credit rating agency Standard & Poor's noted delays in iron ore expansion projects being carried out in Brazil caused by difficulties in obtaining environmental permission, labor constraints and delays in obtaining funding, according to media reports. Most iron ore producers continue to expand production to meet increasing global iron ore demand.
 
The rating agency stated that the expansion of the iron ore operations will in the coming years boost Brazil's iron ore exports, which now account for 33 percent of the global seaborne iron ore market. The S&P report forecasts an additional 300 million mt of iron ore exports from Brazil with the expansion projects of producers such as Anglo American, CSN, Usiminas and Gerdau.
 
Another procedural constraint causing delay in expansion projects is the transportation infrastructure. Since the projects in Brazil also include the infrastructure to transport the mined products as well as the mine site itself, the companies have to deal with licensing regarding the transport systems. The railroad and pipeline transport systems covering 400 km to 500 km in length require permits from several different jurisdiction areas.
 
S&P indicated that investment in new projects and expansions are expected to continue as long as there are natural resources available. The agency stated that the delays in the initial planning were less of a credit concern for the companies; however, after construction begins, the impact of budget increases on cash flow and the potential for higher-than-expected debt burdens can become a credit concern for these companies.