07/05/09

In their quarterly financials, Vale forecast that total global mining and metals development will total only US$60 billion this year, down from US$110 billion in 2008.
Author:;Dorothy KosichPosted:; Thursday , 07 May 2009
RENO, NV;-;
Vale said Wednesday that while the demand for iron ore outside of China remains “extremely weak”, global nickel demand is showing “some limited signals of improvement.”
Vale estimates that 20% of global nickel capacity is now idle, and the company is curtailing its own nickel supply.
Meanwhile the company also suggested that given the sharp fall in iron ore spot prices since July 2008, “we estimate that a substantial part of the local production capacity is not economically feasible.” In the world outside of China, Vale noted that “the demand for iron ore remains extremely weak, with Japan, the world`s second importer, reducing its purchases by 24.4% yoy in 1Q09.
“Besides discontinuing the production of lower grade iron ore production, Vale has speeded up the implementation of its new marketing policy strategy,” the company said in a news release. “Our iron ore output is under a structural shift with the onset of a trend towards a rising share of the low-cost high-quality Carajas ores, boosting our competitiveness in the global arena. The increasing supply of low quality ore by competitors should help Vale to maximize the capture of the value-in-use of its high quality ores, sold at a price premium over the other products.”
“We are enlarging our customer base in China, entering into contracts with midsized steelmakers, which is facilitated by the use of our ships (owned and under COAs) to carry iron ore,” Vale explained.
“We have been adopting a more flexible stance to iron ore pricing, employing different options in our markets efforts, including provisional pricing. As a matter of fact, moving forward iron ore products will be price according to a variety of alternatives, ultimately reflecting the preference of our clients.”
Meanwhile, Vale noted the global demand for nickel is showing some improvement. ;Chinese nickel imports rose by 33% yoy during the first quarter of this year, reaching 60,700 metric tons.
Nevertheless, Vale is continuing to curtail its own nickel production, noting that the demand for nickel from non-stainless steel applications “remains weak with only a few excpetions.” In the meantime, stocks of iron ore at Chinese ports are still increasing, reflecting the low activity of nickel pig iron producers.
In their news release, Vale advised that copper prices have been recovering simultaneously to a decrease in inventories.
Vale estimated that a total of US$200 billion of metals and mining projects have been postponed or cancelled. “For 2009, we expect global mining capex to decline US$60 billion from US$110 billion of last year. The current investment curtailment and the much more restricted supply of funding for investment expected to prevail in the future will contribute to a tighter market situation for minerals and metals in the long term.”
FINANCIALS
Vale reported net earnings of US$1.4 billion, equal to 26-cents per share, for the first-quarter 2009, and almost equal to the fourth-quarter 2008 results of US$1.367 billion.; However, 1Q09 profit was down one-third from the first-quarter 2008 net profit of $2 billion or 42-cents per share.
Vale reported a net debt of US$6.2 billion as of March 21, 2009, down substantially by $18.3 billion a year ago.
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