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who ever thinks IO price is going down might need to think again
Vale just triple there profit from the high demand from china and high iron ore price

Vale profit triples in Q1 on Chinese demand


mining giant Vale said today its first-quarter net profit more than tripled to $US6.83 billion ($6.4bn), a new quarterly record for the company, amid strong global demand for mineral products and metals and soaring iron ore prices.

The profit was about 326 per cent higher than the $US1.604bn of the same period a year ago, Vale said.

The result beat analysts' estimates. It also exceeded Vale's previous quarterly record net profit of $US6bn in its 2010 third quarter, again attributed to higher prices for iron ore, Vale's main product.

Vale said its result was spurred by a "robust increase" in global industrial production levels during the quarter at a rate of nearly 9 per cent annually, which led to higher-than-expected demand for metals and minerals two years after the end of the 2008-09 recession.

"The recovery is broadening, both in terms of sectors and geographically, contributing to the sustainability of the expansion cycle," Vale said.

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Still, while markets for iron ore remain heated -- and prices for metals and fertiliser are still high and will contribute more positively to Vale's results in the future -- global growth continues to face turbulences and risks, including from rising incidences of natural disaster, Vale warned.

The performance was bolstered by a non-recurrent capital gain of $US1.5bn for the sale of aluminium assets, the company said. Even discounting the gain, this was its best-ever performance for a first quarter.

Vale completed the sale of most of its Brazilian bauxite and aluminium operations to Norsk Hydro during the quarter.

Analysts polled by Dow Jones Newswires had forecast a net profit of $US5.43bn. Profit typically falls in the first quarter as the rainy season in Brazil inhibits product shipments.

Despite weather conditions, Vale said it raised its iron ore production to 71.5 million tonnes in the quarter, 3.7 per cent over the year-ago period.

Higher output of iron ore and other metals contributed to net revenue of $US13.213bn, a record for a first quarter and more than double the year-earlier revenue of $US6.604bn, it said. Prices for iron ore more than doubled over the last year after miners successfully introduced a new quarterly price contract system. Iron ore accounted for 69 per cent of revenue in the quarter, it said.

Demand from China, Vale's biggest customer for the steelmaking ingredient, remained strong. Total imports of iron ore by China rose to 177.3 million tonnes in the quarter, up 10 per cent from the year-earlier period. Vale sold 28.16 million tonnes of ore to China in the quarter, representing 41.4 per cent of its total iron ore sales and contributing 29.7 per cent to its overall revenues, it said.

Vale's iron ore sales price averaged $US126.19 a ton in the quarter, double the $US64.76 of a year earlier and higher than the $US121.34 average of the fourth quarter, it said.

Vale said its operating performance improved not only in iron ore but also in all its other products, including pellets, manganese, ferroalloys, coal, nickel, copper and cobalt amid favourable demand.

The company's nickel and copper sales improved after the end of a year-long strike at some of its Canadian operations that hurt output during 2010. Overall, base metals sales grew to $US2.749bn in the first quarter from $US1.526bn in the year-ago period, and accounting for 20.3 per cent of revenue, it said.

Vale said it made gains of $US239 million during the quarter with derivatives operations and $US221m with currency and interest rate swaps designed to protect it from exchange rate volatility. However, it lost $US5m on nickel derivatives, it said.

In the first quarter, Vale invested $US2.743bn, mainly on developing its own pipeline of projects designed to boost capacity in all major product areas over the coming years.

The board approved three major new projects during the quarter: the 6-million-tonne-a-year Serra Sul iron ore mine in Carajas, representing an investment of $US455n; the $US1.188bn Conceicao Itabiritos iron ore processing plant in Minas Gerais state; and the $US5.915bn Rio Colorado potash mine project in Argentina, it said.