Iron Ore Price, page-4715

Vale's fourth-quarter iron ore output falls short of analysts' estimates

Vale reported iron-ore output that trailed analysts' estimates on disruptions related to a dam collapse, offering some relief in a global glut that's squeezing smaller competitors.

Output from the Rio de Janeiro-based company's mines fell to 85.4 million metric tons in the fourth quarter from 88.2 million in the third, it reported on Thursday. While production was up from 83 million a year earlier, it missed the 88.3 million-ton average of seven analyst estimates compiled by Bloomberg.

Vale had record high copper and nickel output.

As prices slump along with flagging demand in China, the three dominant miners - Vale, BHP Billiton Ltd. and Rio Tinto Group - opted to plow on with expansions to displace less efficient producers. Vale is reducing output from some lower quality facilities and replacing it with more productive projects as it prepares to start an expansion at its giant Carajas complex.

While a surge in Australian output is slowing, Rio Tinto's quarterly production still expanded 10 per cent from a year ago, while BHP's rose 1 per cent.

"Overall we are seeing excess supply for at least a few years," Tim O'Brien at DBRS Ltd. said by telephone from Toronto. "Who knows how long that's actually going to last, but certainly it's not a favourable dynamic now. On the demand side, 2016 will probably be a little bit better but the upside is pretty low."

Morgan Stanley projects the iron-ore glut will endure to at least 2020. Benchmark iron ore prices have been trading below $US60 a ton since mid last year and are down more than 70 per cent from a 2011 peak. It rose 1.7 per cent to $US47.14 on Thursday.

Vale's shares were little changed at 10.13am in Sao Paulo. The stock, which rallied 16 per cent in the previous four days as part of a global mining rebound, has lost 56 per cent in the past year.

The company's total quarterly production, including third-party purchases and its Samarco joint venture with BHP Billiton, reached 88.4 million tons. That was curtailed by Samarco's suspension after a November 5 dam rupture that the government describes as Brazil's worst ever environmental disaster. Samarco's pellet feed production slumped 60 per cent.

In December, Vale cut its 2016 iron-ore output forecast to 340 million to 350 million tons from a 376 million-ton guidance given a year earlier. All third-party supply contracts were renegotiated to guarantee a positive contribution margin, Vale said Thursday.

Vale is also the biggest producer of nickel. Total quarterly production of the metal reached a record 82,700 tons. Copper production rose to 112,500 tons, also a record.
Vale is set to release financial results on February 25.


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