Last fin year ending Dec, the companies NPAT was $203.2m on a product price of $196.77 ton. (or a PE of less than 5 last year). Prices for their pellets now consistently realise over $400 ton. That additional revenue on long term annual product sales averaging 2.3mtpa - will generate additional annual revenue of $500m PA. Additional revenues (of $500m PA) kick straight to the bottom line, as profit - less tax and royalties. So despite the low PE last year of 5, profits will treble, at the current realised prices.
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From their annual report year end Dec 2020
Profit after tax of $203.2 million for the year compared to $77.3 million for the prior year, on revenues from operations of $526.3 million compared to $368.6 million for the prior year.
Average realised product price (FOB Port Latta) of $196.77 per tonne for the year compared to $158.33 for the prior year.
____ Brazil iron ore pellet supply squeeze drives premiums
Published date: 16 July 2021
Iron ore pellet premiums are rising on the back of Brazilian mining firm Vale's pellet supply cuts since last year, affecting customers particularly in China and Europe where requirements continue to be strong for pellets and higher grade fines.
The tightness in Brazilian pellets, typically alumina content of no more than 2pc, has gradually led to a supply squeeze of low-alumina pellet in China as well and has driven up premiums in the Chinese market. The Argus 64pc Fe 2pc Al cfr Qingdao assessment was at a premium of $18/dmt above Argus 64pc Fe 3pc Al cfr Qindao on 13 July, having widened from a premium of just $3.50/dmt a year earlier.
"Vale has decreased pellet supply sharply to Europe since last year, and I heard AF08 supplies to Japan and Korea in the second half of this year may be affected," a Singapore-based trader said. Some recent tightness in Brazilian pellet supplies to Japan has been noted by market participants.
"Vale's supply has been tight this year and we are making up the tonnages by sourcing pellets from other producers, availing different brand options from Vale and reducing our usage of pellets," a buyer said. Japan's iron ore imports from Brazil were down 2pc on year to 11.6mn t in January-May this year but May shipments saw a 48pc year on year rise.
While overall iron ore exports from Brazil to Europe continue to recover from the lows of 2020 during the height of the Covid-19 pandemic in the region, pellet shipments to Europe are tight.
"They have no more pellet supplies to a major European steelmaker and also reduced volumes significantly to a large German steelmaker," a Hong Kong-based trader said.
The supply limitations are reflected in rapidly rising pellet premiums. The quarterly Atlantic pellet premium was settled at $20/dmt to a 65pc Fe index for blast furnace grade and $24/dmt for direct reduced grade in the fourth quarter of last year.
Vale settled its third-quarter 2021 pellet premiums at $62/dmt to a 65pc Fe index for blast furnace grade and $70/dmt for direct reduction grade in June, around $10/dry metric tonne (dmt) higher than in the previous quarter. Vale-BHP joint venture Samarco and Switzerland-headquartered Ferrexpo subsequently settled at the same level.
"The pelletising concentrate supply from Itabira and Brucutu mines continue to be limited and pellet supply in the second quarter has not improved at all," a Shanghai-based trader said. "I don't think the problem can be solved in short term, and the tightness may remain in the third quarter or a while longer," he added.
Vale previously cited reduced iron ore concentrate supplies from the Itabira and Brucutu mines as the main reason behind reduced pellet supply in the first quarter of this year. Vale's pellet output in the first quarter was 6.287mn t, down by 11.7pc from the previous quarter or 9.2pc down from a year earlier. Its pellet output in 2020 was 29.7mn t, down sharply by 29pc from 2019.
"We expect production this year [will be] slightly better than the year before, the limitation is the pellet feed production, we have temporary restrictions to dispose our tailings in the main sites, Brucutu, Itabira, so we don't expect to produce more than this year, but we're targeting to go back to the 60 mn t capacity," the miner had said in April. Vale will announce its second quarter production results on 19 July. Seeking alternatives
More mills in the Atlantic are targeting low-alumina Indian pellet for the replacement volumes as well. ArcelorMittal possibly bought a few more Indian pellet cargoes for third-quarter delivery in Europe and another key north European mill has done the same.
The tightness has extended to domestic supplies in Brazil with CSN increasing its receipts of KIOCL Indian pellet, typically with alumina of less than 2pc. The Brazilian mill loaded a cargo of KIOCL pellets in late June and is due to load another KIOCL pellet cargo late this week or early next week, bound for Itaguai port in Brazil, port data shows.
The shortage has also opened up opportunities for pellets from the US being offered at a premium to a 62pc Fe index in Europe. A west European mill received a US steel pellet cargo at the EMO terminal in the Netherlands' Rotterdam.
By Kitty Xie, Siew Hua Seah and Deepali Sharma
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GRR Price at posting:
84.5¢ Sentiment: Buy Disclosure: Held
(20min delay)