Vale Caps Record Year of Output Adding to Global Iron Glut

2015-02-20

Vale SA, the largest iron-ore producer, reported a 2.1 percent increase in fourth-quarter production of the steel-making ingredient, capping a record year as large miners boost their share of an oversupplied global market.

Output excluding a stake in the Samarco Mineracao SA venture rose to 83 million metric tons from 81.3 million tons a year earlier, the company said in a statement Thursday. Including iron ore from third parties, output was 86.3 million tons, compared with Bradesco BBI’s 87 million-ton estimate. Vale’s nickel output rose 8.4 percent to a record 73,600 tons.

Expansions at the Rio de Janeiro-based company and its two main iron-ore competitors BHP Billiton Ltd. and Rio Tinto Group are creating a surplus in the seaborne market that Australia & New Zealand Banking Group Ltd. estimates will expand to 85 million tons from 39 million tons in 2014. Iron-ore prices have plunged 48 percent in the past year to six-year lows, prompting producers to seek cost cuts to protect margins.

Vale had a “strong operational performance,” it said in the statement. “Iron-ore inventories decreased by 4.8 million tons in the fourth quarter supported by record shipments.”

Large iron-ore producers are betting they can gain market share as smaller, higher-cost miners are squeezed out by the price slump. The Brazilian company expects to complete its giant Serra Sul S11D project by end 2016.

Rio Tinto, the second-largest iron ore supplier, has cut project spending to the lowest since 2010 and is targeting $750 million of additional savings this year, it said last week. BHP is also paring expenditure and targeting cuts to operating costs in Western Australia’s Pilbara iron ore region.

Ore with 62 percent content at Qingdao rose 0.7 percent to $63.44 a dry ton on Thursday, according to Metal Bulletin. Vale’s shares retreated 0.6 percent at 10:38 a.m. in Sao Paulo.

Vale’s own production of iron ore for the full year was a record 319.2 million tons while quarterly output fell 3.2 percent from the third quarter.

Source from : Bloomberg

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