Bloomberg News

Vale Posts Record Iron-Ore Output for 2Q as Prices Fall

July 24, 2014

Vale SA (VALE5), the world’s largest iron-ore producer, said output for the steelmaking ingredient rose a better-than-expected 13 percent in the second quarter, joining BHP Billiton Ltd. (BHP) and Rio Tinto Group. in boosting supply as prices fall.

Iron-ore production excluding a stake in the Samarco Mineracao SA venture rose to 79.4 million metric tons from 70.6 million tons a year earlier, the Rio de Janeiro-based company said in a statement today. That beats the 73.4 million-ton average of seven analysts’ estimates compiled by Bloomberg.

Iron ore extended losses to the lowest level in a month after Goldman Sachs Group Inc. (GS:US) said increasing production from Australia and Brazil will deepen a global glut every year through 2018. Vale has been losing market share to Rio Tinto and BHP as the second and third-largest iron-ore producers expand their Australian mines and the Brazilian company completes its giant Serra Sul S11D project by the end of 2016.

“This positive result suggests Vale is likely to achieve its production target for the year after having missed it in 2013,” Mariana Bertone, an equity analyst at GBM Grupo Bursatil Mexicano SA, said in a telephone interview from Sao Paulo. “The production increases in Brazil and Australia are posing a risk for iron-ore prices in the second half.”

Output at Carajas, the world’s largest iron-ore complex, rose 34 percent in the quarter. Production at the company’s deposits in southeastern Brazil, which account for a third of its total, dropped 0.9 percent in annual terms.

Key Ingredient

BHP, Rio Tinto and Vale, the world’s top mining companies, have been boosting the supply of the key ingredient to make steel, expanding a global glut. Ore with 62 percent iron content at the Chinese port of Tianjin fell 0.7 percent to $93.60 a dry ton today, the lowest since June 24, according to data from The Steel Index Ltd.

Vale rose 1.4 percent to close at 28.95 reais in Sao Paulo today, the highest since April 14. The stock lost about 12 percent this year.

“Production grew in all systems, positively impacted by better weather conditions,” Vale said in the statement.

Vale, the world’s second-largest nickel producer, said output for the base metal declined 5.4 percent in the quarter to 61,700 tons as the company undertook planned maintenance work at its Sudbury plants. The result missed a 66,600-ton average forecast by eight analysts surveyed by Bloomberg. Copper output slid 11 percent in the quarter to 81,000 tons, while coal output fell 7 percent to 2.21 million tons.

The performance of the company’s base metals unit, Vale’s largest after the ferrous minerals business, was slightly negative, according to Bertone.

“Nickel production was affected more than we expected,” she said. “We were also waiting for higher copper output.”

(An earlier version of this story corrected a year-ago production number for iron ore.)

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editors responsible for this story: Carlos Caminada at ccaminada1@bloomberg.net Robin Saponar


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