Miner assures investors over deliveries and sales
BRAZILIAN miner Vale has dismissed concerns of falling iron ore demand in China, telling investors that “we are delivering every tonne that we are able to produce and ship”.
“In July sales were completely normal, no problems for delivery, and for August we have all the ships already nominated,” said Vale’s director of ferrous metals, Jose Carlos Martins.
“For the time being I do not forsee any problems arising for the slowdown in the property sector in China.”
The world’s largest iron ore producer controls nearly a third of the billion-tonnes-a-year seaborne trade in iron ore and reported second-quarter iron ore production levels of 75m tonnes, up 27% on the same period last year and 9.8% on the last quarter.
First-half production of iron ore was 144.9m tonnes, a 34.5% year on year increase.
Vale also made its first comments on the change from annual to quarterly pricing, which saw the cost of iron ore rise nearly 40% in the second quarter. Customers were “fulfilling all their obligations”, Mr Martins said.
“Customers are committed and behaving like we expected.”
The new sales price was partly attributed to a collapse in capesize freight rates over the last two months, which saw fronthaul routes from Brazil to China slump from 2010 peaks of over $34 per tonne in early June to $18.50 last week. A surge in new capesize vessels also depressed rates.
Vale said its customers would determine if iron ore pricing would shift from a quarterly to a monthly system, but believed volatility would settle.
However European demand -- which accounted for 12% of Vale’s 266m tonnes of shipments last year --had recently slowed after Vale was placed pressure for deliveries in the first half of 2010.
German iron ore consumption had returned to pre-crisis levels while other countries were lagging with demand overall still at 15% lower than pre-crisis levels.
“So I think in the fourth quarter we will see some recovery in Europe,” Mr Martins said.
Vale executives also said they expected iron ore prices to stabilise at around the $100 mark in the long term and said that domestic iron ore production in China had reached fully capacity in the last three months, stabilising spot market iron ore prices.
Additional reporting Philip Georgiadis
