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All eyes on Vale

The Brazilian miner has laid out some very robust iron ore production targets, writes Jeffrey Landsberg from Commodore Research.

As was widely reported in April, Anglo American’s Minas Rio iron ore mine in Brazil will not be producing or selling any additional iron ore cargoes in 2018.  Iron ore mining at Minas Rio will remain offline through the end of this year in order to allow for a problematic pipeline to be fully inspected. Of note is that Minas Rio produced 12.5m tons of iron ore during Q2 – Q4 2017, but this time around the capesize market will not be able to enjoy these vital Atlantic basin cargoes.
However, in its most recent quarterly sales report, Vale again confirmed that it plans on making good on its robust 2018 production target. Vale is continuing to forecast that it will produce a total of 390m tons of iron ore this year. Vale officials have also publicly stated that H1’s iron ore output is expected to come in at approximately the same level that was produced in H1 2017. 178m tons of iron ore was produced in H1 2017, which points to Vale expecting that its production in Q2 this year will total around 96m tons (82m tons was produced in Q1 this year).
Also extremely significant is that Vale officials have publicly stated that iron ore production is likely to total “distinctly over” 100m tonnes per quarter during Q3 and Q4. Vale produced only 82m tons of iron ore in Q1 this year – but 96m tons is expected to be mined this quarter, and over 100m tons is expected to be produced in Q3 and Q4. Based on these recent statements and 2018’s production target, Vale is specifically expecting that its iron ore production will average approximately 106m tons in Q3 and Q4. Such robust production is set to benefit the capesize market greatly.
Overall, the outlook for the capesize market still remains encouraging (and we remain very bullish for Chinese iron ore import demand prospects as we have examined often in our reports). Even loftier heights would be in store for the 2018 capesize market, however, if Anglo American’s Minas Rio mine was still producing iron ore. At the same time, though, 2019 is now shaping up to experience a huge shift and epic capesize market if Minas Rio and also Samarco do end up coming back online as currently expected.
2018’s story has still not come close to being fully written however. Vale’s iron ore production target is still just that – a target – and there is never a guarantee that any miner will make good on annual production targets. Fortunately, though, there remains no sign that Vale will pull back on its ambitious production plans. For now, all eyes remain on Vale.
This article first appeared in Maritime CEO magazine, which has been distributed at multiple Posidonia-related events in Greece all week. Splash readers can access the full magazine for free by clicking here.



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