20-05-2016

Vale sees slower displacement of small iron miners, but warns bumpy road ahead

Vale

The displacement of smaller iron ore miners by global mining companies will start to slow if the price stays around $50 per ton, a senior official at top iron ore miner Vale said on Thursday.

“The problem is not demand, the problem is in the supply side. Over capacity is a global issue. Because of that we’re going to see a long and painful period of adjustment in the industry,” Cláudio Alves, Vale’s global director for marketing and sales of iron ore told Reuters.

A surge in Chinese steel prices helped spot iron ore rebound by around 30 percent this year, and Alves said that has helped boost the utilization rate among Chinese iron ore miners, but he sees more volatility ahead.

“The industry can breathe a little bit but I’m not so confident ahead. I believe we’ll see a bumpy road ahead of us with a lot of volatility in both steel and iron ore,” he said on the sidelines of an industry conference.

A number of smaller iron ore mines closed due to the slump in iron ore prices over the past three years and Australian miner Fortescue Metals Group has not seen any of those resume production since the recent price rebound, a company spokesperson said by email.

“Naturally, improved prices will slow down the exit process of others,” the spokesperson said.

From a low of $37 a ton in December, iron ore rallied to $68.70 in April, boosted by a surge in Chinese steel prices that many traders and analysts have largely attributed to a surge in retail buying. The price stood at $55.90 on Wednesday.

Vale also expects China’s economy to grow 6-7 percent until the beginning of the next decade which should continue to support iron ore demand, said Alves.

The Brazilian miner has no more expansion plans after it lifts output to 450 mln tonnes by 2019-2020, Alves said, from between 340 million and 350 million tonnes this year.

Source: Reuters

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