China ‘Golden Years’ Are Gone as Growth Slows, Vale Says

China’s “golden years” are gone as economic growth at the world’s second-biggest economy slows, said an official at Vale SA (VALE5), the top iron-ore producer.

Vale, which shipped about 44 percent of its iron ore and pellets to Chinese steelmakers in the second quarter, expects the country to start to recover by the end of the year, said Roberto Castello Branco, the Rio de Janeiro-based company’s director of investor relations. Vale sees some “early signals” of recovery, which are still “very weak,” he said.

“We are not going to see the spectacular growth rates of 10, 12 percent per year,” Castello Branco said at the Bloomberg Brazil Economic Summit in Rio today. “The golden years are gone.”

Iron-ore prices dropped to the lowest since Dec. 2009 yesterday on slower growth in China, the biggest user of the steelmaking ingredient, and a weaker outlook for the global economy. Vale said on July 25 that second-quarter profit plummeted 59 percent, missing analysts’ estimates for the fourth time in the past five quarters, after prices for minerals and metals declined.

Chinese policy makers cut their expansion target to 7.5 percent from the 8 percent goal in place since 2005, Premier Wen Jiabao said on March 5. Wen, 69, is trying to reduce China’s reliance on exports and boost consumption as he hands power to a younger generation of leaders this year. The economy grew 7.6 percent in the second quarter, the slowest pace since 2009.

“We are not pessimistic about China, but we are not over- bullish,” Castello Branco said. “We are just realistic.”

Ore Rises

The price of ore with 62 percent iron content for immediate delivery to the Chinese port of Tianjin rose 0.4 percent to $113.30 a ton today, according to a price index compiled by The Steel Index Ltd. The price, which rose to as much as $191.90 per ton last year, lost 18 percent during 2012.

Vale is “very negative” about the prospects for growth in Europe, Castello Branco said. Europe bought about 20 percent of Vale’s iron ore and pellets shipments in the second quarter.

Vale will remain the “undisputed” global iron-ore leader as it develops projects including its $8.04 billion Serra Sul expansion at the Carajas mine, in northern Brazil, Castello Branco said. Serra Sul, which will add 90 million metric tons of capacity starting in the second half of 2016, will allow Brazil to recover iron-ore market share lost to Australia in recent years, he said.

Vale shares dropped 3.8 percent to 36.24 reais at the close of trading in Sao Paulo today, the biggest fall since July 24. The stock declined 7.5 percent in the past 12 months.

To contact the reporters on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net; Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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