By Juan Pablo Spinetto and Peter Millard Nov 27, 2014
Bloomberg
Iron-ore prices are poised to rebound from five-year lows as Asian infrastructure demand improves and high-cost mines close, according to the top producer Vale SA. (VALE)
The steelmaking raw material, which has slumped 49 percent this year to $68.49 a dry metric ton, will return to an average range of $85 to $90 next year, Vale Chief Executive Officer Murilo Ferreira said in an interview yesterday.
The company isn’t considering slowing its expansions because of slumping prices and is pressing ahead with the $19.7 billion Serra Sul S11D mine and logistics project, the industry’s biggest, he said.
“There was a lot of volatility in prices this year and the market is undershooting at the moment and this will bring about a correction,” Ferreira, 61, said at the company’s headquarters in Rio de Janeiro. “This correction will come through the closure of many inefficient miners of high cost and poor quality iron ore.”
Vale, Rio Tinto Group (RIO) and BHP Billiton Ltd. are maintaining their expansions betting that higher-cost producers will be squeezed out of the market. The price plunge, including a 22 percent drop in the past three months, is prompting speculation China will close inefficient mines, while Cliffs Natural Resources Inc. is considering shutting a mine in Canada.
The raw material slid below $70 on Nov. 25 for the first time since June 2009 amid concern slower Chinese growth will curb demand from the biggest iron-ore consumer. The market needs to absorb a surplus of about 110 million tons next year, almost double the 60 million tons in 2014, Goldman Sachs Group Inc. estimates.
Price Struggle
“China mines produced about one-third of the country’s iron ore needs and any significant decline in output would be welcomed by the global industry, which has struggled with much lower pricing,” Bloomberg Intelligence analysts Kenneth Hoffman and Yi Zhu wrote in a Nov. 21 report.
About 140 million tons of export supply growth is forecast for next year, including 30 million tons from Vale, Citigroup Inc. said Nov. 11. The bank sees prices collapsing to less than $60 next year as output climbs and demand remains weak.
Shares of Vale dropped 4 percent to 19.75 reais in Sao Paulo yesterday after slumping to an eight-year low on Nov. 18. The stock lost 40 percent during 2014, the worst performer among the world’s top mining companies.
Pressing Ahead
While iron-ore prices may “eventually” surpass $100 next year, they won’t trade at that level on a sustainable basis, Ferreira said. The company had said as late as July that prices of $110 were sustainable in the longer term.
“Supply came in faster than we expected and the world’s demand was less exuberant than what we expected,” said Ferreira, who in May will cap four years at the helm of the world’s largest iron-ore producer.
“Several” iron-ore producers can’t sustain operations for a prolonged period of time with iron ore below $90 a ton, Ferreira also said in the interview. The company is concluding most of its ventures with the exception of Serra Sul S11D in Brazil, which will have the industry’s lowest cost, he said.
“We are not considering delaying any project,” he said. “We finished some in 2013, some others in 2014 and a few more in 2015. We have only S11D remaining and that one is untouchable.”
A lighter project load, currency depreciation and better negotiating conditions with suppliers will allow the company to present next week a lower budget plan for 2015 compared with this year, Ferreira said, declining to discuss specific targets. The miner is working to announce “a good deal” before the end of the year, the executive said, declining to give details when asked about possible assets divestment.
Vale is scheduled to discuss its strategy, including next year’s budget and output targets as well as project updates, at meetings with investors in New York and London on Dec. 2 and Dec. 5, respectively.
**
Bloomberg
Iron-ore prices are poised to rebound from five-year lows as Asian infrastructure demand improves and high-cost mines close, according to the top producer Vale SA. (VALE)
The steelmaking raw material, which has slumped 49 percent this year to $68.49 a dry metric ton, will return to an average range of $85 to $90 next year, Vale Chief Executive Officer Murilo Ferreira said in an interview yesterday.
The company isn’t considering slowing its expansions because of slumping prices and is pressing ahead with the $19.7 billion Serra Sul S11D mine and logistics project, the industry’s biggest, he said.
“There was a lot of volatility in prices this year and the market is undershooting at the moment and this will bring about a correction,” Ferreira, 61, said at the company’s headquarters in Rio de Janeiro. “This correction will come through the closure of many inefficient miners of high cost and poor quality iron ore.”
Vale, Rio Tinto Group (RIO) and BHP Billiton Ltd. are maintaining their expansions betting that higher-cost producers will be squeezed out of the market. The price plunge, including a 22 percent drop in the past three months, is prompting speculation China will close inefficient mines, while Cliffs Natural Resources Inc. is considering shutting a mine in Canada.
The raw material slid below $70 on Nov. 25 for the first time since June 2009 amid concern slower Chinese growth will curb demand from the biggest iron-ore consumer. The market needs to absorb a surplus of about 110 million tons next year, almost double the 60 million tons in 2014, Goldman Sachs Group Inc. estimates.
Price Struggle
“China mines produced about one-third of the country’s iron ore needs and any significant decline in output would be welcomed by the global industry, which has struggled with much lower pricing,” Bloomberg Intelligence analysts Kenneth Hoffman and Yi Zhu wrote in a Nov. 21 report.
About 140 million tons of export supply growth is forecast for next year, including 30 million tons from Vale, Citigroup Inc. said Nov. 11. The bank sees prices collapsing to less than $60 next year as output climbs and demand remains weak.
Shares of Vale dropped 4 percent to 19.75 reais in Sao Paulo yesterday after slumping to an eight-year low on Nov. 18. The stock lost 40 percent during 2014, the worst performer among the world’s top mining companies.
Pressing Ahead
While iron-ore prices may “eventually” surpass $100 next year, they won’t trade at that level on a sustainable basis, Ferreira said. The company had said as late as July that prices of $110 were sustainable in the longer term.
“Supply came in faster than we expected and the world’s demand was less exuberant than what we expected,” said Ferreira, who in May will cap four years at the helm of the world’s largest iron-ore producer.
“Several” iron-ore producers can’t sustain operations for a prolonged period of time with iron ore below $90 a ton, Ferreira also said in the interview. The company is concluding most of its ventures with the exception of Serra Sul S11D in Brazil, which will have the industry’s lowest cost, he said.
“We are not considering delaying any project,” he said. “We finished some in 2013, some others in 2014 and a few more in 2015. We have only S11D remaining and that one is untouchable.”
A lighter project load, currency depreciation and better negotiating conditions with suppliers will allow the company to present next week a lower budget plan for 2015 compared with this year, Ferreira said, declining to discuss specific targets. The miner is working to announce “a good deal” before the end of the year, the executive said, declining to give details when asked about possible assets divestment.
Vale is scheduled to discuss its strategy, including next year’s budget and output targets as well as project updates, at meetings with investors in New York and London on Dec. 2 and Dec. 5, respectively.
**
No comments:
Post a Comment