Vale to Cut Spending 26% Amid Iron-Ore Price CollapseJuan Pablo Spinetto
Vale SA, the world’s largest iron-ore producer, will reduce spending to a six-year low, joining rivals in cutting costs after prices for the steelmaking ingredient fell by almost half.
Vale plans to invest $10.2 billion next year, excluding research and development, a 26 percent drop from this year’s budget, the Rio de Janeiro-based company said in a statement today. That’s below the $10.4 billion average estimate of nine analysts surveyed by Bloomberg and the lowest since 2009.
Vale joins Rio Tinto Group and BHP Billiton Ltd. in trimming expenses as Chinese demand cools and iron-ore prices drop to $70.67 a dry ton from a high last December of $140.28. The top three iron-ore suppliers are betting added output will squeeze higher-cost competitors, helping to offset a decline in prices.
“This is the fourth consecutive year in which Vale reduces its capital expenditures, maintaining capital discipline and focusing only on world class projects,” the company said in the statement.
Chief Executive Officer Murilo Ferreira said last month he expects prices will return to an average range of $85 to $90 next year, as high-cost mines shut and Asian demand increases.
Vale has dropped 43 percent this year as the company produces record amounts of iron ore. Vale slipped 2.4 percent to 18.74 reais at the close in Sao Paulo.
The company expects output of iron ore to climb to 340 million metric tons in 2015 including third-party purchases. Nickel output will climb to 303,000 tons next year while copper is forecast to rise to 449,000 tons.
For next year, Vale plans to spend $6.36 billion on new projects and $3.81 billion to maintain existing operations, the company said today.
Vale is scheduled to hold investor meetings in New York today and in London on Dec. 5.
(For information on Vale Day 2014, click here.)