vale adjusts to global shake-up

Vale adjusts to global shake-up

Claire Svircas -- mining news --
Thursday, 22 January 2009

BRAZILIAN major Vale says its proactive response to cut back production and shut down higher-cost mines has softened the blow of the economic crisis on the company’s end of year production report.

Riding good operational performances in previous quarters, Vale managed to achieve eight production records for the year with 275,400t of nickel, 11.7 million tonnes of bauxite, 5Mt alumina, 311,600t copper and 4.1Mt coal.

However, the final quarter of 2008 proved to be the company’s undoing with a 26.3% decrease in iron ore production in the December quarter, compared to the previous quarter.

“Given the unprecedented demand contraction across the globe resulting from a substantial cutback in steel production, our iron ore in the last quarter of 2008 reached 63.3 million tonnes, decreasing by 26.3 per cent relatively to the third quarter 2008 and 21 per cent against the fourth quarter 2007,” the company said in a statement.

Vale’s iron ore output reached 301.7 million metric tons for the year, showing a 0.5% decrease from 2007’s 303.2Mt.

This was the first reduction in Vale’s annual production of iron ore since 1999.

To protect itself from the global demand reduction and avoid inventory build-up, Vale shut down seven of its nine pellet plants in 2008 and postponed start-up operations at new plants, including two of the three that form part of a joint venture with Australian giant BHP Billiton in Samarco.

As a result pellet production fell 24.9% in December compared to the previous quarter.

Vale’s production of manganese ore reached 491,000t in the quarter, compared with 694,000t for September.

The company also shut down its manganese ore mines and ferroalloy plants in Brazil in December, with operations expected to resume in February 2009.

The volume of nickel produced increased 1.1% to 73,200t for the quarter; cobalt production added 5.6%; and bauxite reached a new record of 3.5Mt, an increase of 32.7% year on year.

In coal, production reached a record 1.1Mt for the quarter, 703,000t of metallurgical coal and 387,000t thermal coal.

Vale said the falls across its activities for the December quarter illustrates the efforts the company is making to adjust operational activities to current demand levels.

Shares in Vale were last trading at $US12.88 on the New York Stock Exchange