Vale Goes Down Market in China in Bid to Beat Australian Rivalsby
Miner says it’s homing in on distribution deals with locals
Brazilian company looking to become biggest supplier to China
Vale SA is negotiating partnerships that will help it sell more iron ore to smaller Chinese customers in the country’s interior as part of the Brazilian company’s efforts to take market share from its Australian rivals.
The miner is completing deals with local companies capable of helping it improve distribution throughout China, the largest consumer of the steel-making ingredient, Logistics and Mineral Exploration Executive Director Humberto Freitas said in an interview Monday. Vale created a distribution company to spearhead the building of these new relationships.
“We have already reached the biggest clients,” Freitas said at the company’s offices in Rio de Janeiro. “Now we need to reach the smaller ones.”
With prices down about 70 percent from a 2011 peak amid slowing demand, competition among producers including BHP Billiton Ltd. and Rio Tinto Group is growing. Vale already ships as much as 400,000 metric tons at a time to its largest clients using giant vessels, and now wants to further penetrate the Chinese market. It’s developing a system of selling ore to consumers wishing to pay in Chinese yuan from stockpiles at coastal distribution centers.
In April, Chief Executive Officer Murilo Ferreira said he intended to boost sales in China by 40 percent and become the country’s leading provider. While Vale ships 180 million tons a year to China, it still trails Rio Tinto and BHP, the company said.
Vale said a new $14 billion mining complex in northern Brazil and the ability to store material in China and Malaysia will move it closer to its Australian rivals. The Malaysian distribution center can handle 30 million tons a year.