Bloomberg News

Vale January Southern Brazil Iron-Ore Output Cut 20%

January 12, 2012

(Company corrects to say output drop is in southern Brazil in first paragraph.)

Jan. 12 (Bloomberg) -- Vale SA, the world’s largest iron- ore producer, will lose about 20 percent of its January output of iron-ore in southern Brazil because of rains in three of the country’s states.

“We are in Noah’s Ark; the rains have to stop for us to go down” to the mines, Jose Carlos Martins, the company’s head of ferrous and strategy, told reporters today on a conference call. More rains are forecast for next week, Martins said.

Vale yesterday declared force majeure, a legal clause that allows companies to miss deliveries, on iron-ore shipments and said it will lose 2 million metric tons of the steel-making ingredient because of the rains in southeastern Brazil, where the company has 15 mines. The downpours are the largest since at least 1910, Martin said today.

The impact on Vale’s quarterly earnings are likely to be “insignificant,” Martins said on today’s call. The company cannot redirect shipments from other mines to its clients because “it’s working at capacity limits,” he said.

Floods and landslides in the southeastern states of Minas Gerais, Rio de Janeiro and Espirito Santo caused by rains have killed at least 30 people and left more than 5,000 homeless since the beginning of the year.

Vale’s main concern is for European clients, who are more dependent than Asian ones on the company’s iron-ore shipments, Martins said. Asian clients are also protected by the fact that they are now receiving shipments sent 45 days ago, he said.

Vale shares dropped 1.7 percent to 41.01 reais at 4:40 p.m. in Sao Paulo trading. The shares fell 29 percent last year.

--Editors: Charles Siler, Jessica Resnick-Ault

To contact the reporter on this story: Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net

To contact the editor responsible for this story: Robin Saponar at rsaponar@bloomberg.net


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