Since the establishment of the projects in Brazil, the country has gone through a number of changes politically, economically, and socially which were unable to be foreseen at the start of the project.
In 2008 the country obtained investment grade status, however by 2016 the last of the major credit ratings agencies, Moody’s Investors Service had stripped Brazil of its investment grade status. Shortly after, the country’s benchmark stock indicator fell dramatically after the rating was reduced two steps to Ba2.
The new rating puts Moody’s grade in line with Standard & Poor’s, and just one level below Fitch’s Ratings. The outlook is negative, which means in simple terms more downgrades are expected in the future.
Brazils debt ratio has increased by around a third over the past two years to 66% and is expected to increase throughout 2017 and 2018. Predictions currently expect Brazils debt ratio to exceed 80% by the end of 2018.
With increasing inﬂation and the value of the Brazilian Real falling in relation to the euro, the project – although expected to perform relatively well in Brazilian Real (R$) terms – is expected to underperform in euro terms should harvest focus on the domestic markets as proposed in those original agreements signed at the start of the projects in 2008.
The Brazilian pig iron industry (the main market for the project based on the original project proposal in 2008) is unrecognisable from the industry that it was in 2008; the result of outside influences has resulted in the closure of all but a handful of pig iron facilities across Brazil.
Those pig iron facilities that are still in operation are reported to now be working on a part time basis having formed a co-operative. Due to this reduced demand and a notable increase in the supply of eucalyptus wood locally both energy wood and charcoal prices have fallen heavily domestically over the past few years.
As such this website has included detailed information related to the current domestic market in order to inform clients in a timely manner as to the companies current strategy and recommendations which are to focus on export markets expected to provide the best options at harvest.
Whilst IFU holders of the company are free to direct GWD Forestry of their wishes at any time as to the harvest clients are reminded that information within this website has been provided for research purposes in regards to the current environment and market conditions at harvest.
Clients are reminded that they must direct the company prior to harvest completion and upon receiving harvest notification as to changes regarding contractual agreements signed at the start of the project.
Failure on behalf of clients to notify the company of changes in writing ahead of harvest and in specific relation to those IFU’s held may result in the company continuing its harvest operations in line with agreements signed between the company and its IFU holders at the start of the project.
IFU holders should be aware that due to the current constrictions within the market, and the reduction in wood buyers within the region, the company (in the interests and direction) of IFU holders is currently negotiating terms it feels are less favourable than they should be. Although prices are expected to regain in the future at present due to the increased supply and reduced demand those prices offered currently for energy timber domestically are approximately 50% lower than prices reported independently at the start of the project by LEF.