So much for Vale "flooding the market". Production down over 30% YoY and unlikely to pick up to full speed for 2-3 years. The problems are structural, and no immediate recovery to full capacity likely. Overseas stockpiles used to bolster sales.
Global iron ore prices will remain higher than expected by many analysts because of the fallout and recovery at Vale, the big Brazilian miner in the wake of the January 25 tailings dam disaster.
Vale said on Monday that it will be up to two, perhaps three more years before its production gets back to pre-January 25 dam wall disaster levels.
That could see the global market short by around 30 million tonnes a year from 2020 and gradually improving by 2021-2022.
That’s good news for Australia’s big three – Rio Tinto, BHP, and Fortescue.
The estimate, contained in the miner’s June quarterly report could see global iron ore prices remain around current levels of just over $US100 a tonne especially with Rio Tinto grappling with quality problems in its Pilbara mining complex in northern WA.
Vale’s production of iron ore dropped by 33.8% year-on-year in the second quarter of 2018, amid restrictions resulting from a tailings dam accident at the Brumadinho mine in the southern mining complex in January in Brazil and the poor weather conditions in the north of the country.
Production totalled 64.06 million tonnes, down from 96.76 million tonnes in the June quarter of 2018, Vale said on Monday.
Output also dropped by 12.1% from 72.87 million tonnes in the first quarter of 2019.
Pellet production also fell by more than a quarter to 9.07 million tonnes, down from 12.84 million tonnes in the second quarter of 2018 and 12.17 million tonnes in the first quarter of this year.
Vale also said that quarterly sales of the raw material fell 15.5% to 61.945 million tonnes. Including pellets sales volume for the quarter was 70.8 million tonnes in the June quarter, 4.5% higher than in the March quarter but down 18.2% from the June quarter of 2018.
Vale was forced to use offshore stocks of iron ore to maintain shipments – “Although the production volumes decreased quarter-on-quarter, sales volumes increased 3.2 million tonnes due to the consumption of offshore inventories,” the miner said.
That left Vale a distant third in the global iron ore stakes behind first place Rio with 85.4 million tonnes in the three months to June and BHP with 72.4 million tonnes.
In its production report Vale said it had “made substantial progress concerning the 93 million tonnes per year (mtpy) of Iron Ore production capacity stopped in 1Q19, with the resumption of Brucutu operations on June 22nd, recovering 30 Mtpy of production capacity.
“Regarding the 60 Mtpy currently curbed, Vale expects that the 30 Mtpy of dry processing production will be gradually resumed starting by the end of this year and the remaining 30 Mtpy, which includes wet processing, is estimated to return in about two to three years.”
Vale reaffirmed its previous full-year iron ore and pellets sales outlook forecast at between 307 million to 332 million tonnes with the likely outcome towards the midpoint of the range.
The news though had no impact on global prices which eased to around $US118 a tonne on a further round of pollution controls and limits on steel production in northern Chinese steel-making centres. The global index price for 62% Fe ore delivered to northern China fell $US3.46 or more than 2.7% to $118.33 a tonne.
(20min delay)