Vale Rallies Most in Month Amid Iron-Ore Supply Cut PlanJuan Pablo Spinetto
Shares of Vale SA, the world’s largest iron-ore miner, rallied the most in a month as the company presses ahead with plans to cut production of lower-quality products amid an attempt to boost profit.
Vale will withdraw output of iron ore by 25 million metric tons starting this month, Peter Poppinga, the company’s executive director for ferrous and strategy, said at an industry conference in Sao Paulo. The cuts will come from its high-silica ore at its mines in south and southeast Brazil and from third-party purchases, he said.
“Our mantra is not volume at any cost anymore, it’s to maximize margins,” Poppinga told reporters at the event. “It doesn’t mean shutting mines, it means optimizing some production flows at plants.”
The Rio de Janeiro-based miner is moving to trim low-quality output as it focuses on boosting profit amid what it sees as an oversupplied market in 2015, and one that will probably be in surplus next year, Poppinga said. Shares of Vale earlier reached a 10-year low on Monday and have slumped more than 20 percent since the end of December as a bear market for iron ore deepened.
Vale jumped 6.6 percent to close at 15.36 reais in Sao Paulo, the most since June 2, on Poppinga’s comments. The stock lost 44 percent in the past 12 months.
The company said in April it was considering cutting output by 30 million tons, and the reduction announced Monday is part of that plan, Poppinga said, adding that the company still seeks to reach its output target of 340 million tons in 2015.
“We will try to reach it by boosting products with higher margins,” he said.
The company said in a statement Monday that its supply guidance for the year is unchanged amid the reduction.
Iron ore with 62 percent content delivered to the Chinese port of Qingdao rose 0.4 percent to $50.30 a dry ton on Monday, according to Metal Bulletin Ltd, after dropping to $44.59 on Wednesday, the lowest in data going back to May 2009. Imports of the steelmaking ingredient by China shrank in the first six months of the year, highlighting weak demand from the world’s largest buyer, according to customs agency figures released on Monday.
Prices for iron ore, which almost halved in the past year, are poised to rebound as China shuts mines and inventories in the Asian nation are replenished, Poppinga said.
“The price will have a big volatility ahead, but we believe it reached a floor, and we will have a recovery,” he said. “Imports will grow.”