Brazil's Vale plans to substitute out old production
RIO DE JANEIRO – Brazil's Vale said on Thursday it expects to replace some old higher-cost iron-ore production as new capacity comes on stream, the clearest sign yet the miner could cut future output forecasts due to weak prices.
Any move to curb output growth by the world's largest producer of iron ore will be closely watched by a market currently in oversupply due to new capacity from Australia and Brazil combined with slower demand growth in China.
This glut, as well as expectations it could get worse, has caused the price of iron ore to fall 47% over the past 12 months.
This year "we are removing 22-million tonnes which have less important, weaker margins," Vale's head of ferrous Peter Poppinga said during a conference call to discuss first quarter results. This will be replaced with new, cheaper iron-ore coming on stream from expansion projects, he said.
"If the market demands, we are prepared to reduce production from the south and southeast system," Poppinga added, referring to the company's mines in the Brazilian state of Minas Gerais.
Poppinga said Vale's production forecast for 2015 would remain 340-million tonnes, but did not specify whether adjustments could be made to forecast for next year and beyond.
Vale has previously said it expects to continue increasing production over the next few years, reaching 376-million tonnes next year and 453-million tonnes in 2018.
The company reported a first quarter net loss of $3.2-billion on Thursday as it grapples with lower iron-ore prices.
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