July 29, 2021

The World Stock Markets Tips & Targets, News, Views & Updates

The World Stock Markets Tips & Targets, News, Views & Updates

Vale’s Q2 iron ore production rises 12% on year, current capacity at 330 mil mt/year

Highlights

Miner misses analysts’ production expectations

Coal output rises following plant revamp

Brazilian miner Vale said late on July 19 that it “completed another quarter of iron ore production growth” in Q2, achieving a current annual capacity rate of 330 million mt/year. The company has continued on its path to production recovery after curbs were placed on its output following the January 2019 Brumadinho fatal tailings dam disaster.

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The company kept its iron ore production guidance for 2021 stable at 315 million-335 million mt. This compares with production of about 300 million mt in 2020. At the end of 2021, production capacity working rates should grow to 350 million mt/year, reaching 400 million mt/year at the end of 2022, the company said in April.

However, the Q2 output came in 3% below analysts’ consensus expectations.

“Vale continues to creep back towards more robust iron ore production (we forecast 359 mt for 2022) and better iron ore sales should help our estimates. However, we expect the market is likely to take this as a negative, especially with the uncertainty overhanging nickel and copper for the rest of the year,” said Tyler Broda, analyst with Royal Bank of Canada, in a note received on July 20.

The company increased its quarterly output of iron ore fines to 75.7 million mt in Q2, up 12% from Q2 2020, and up 11.3% from Q1 2021, it said in a production report. The increase was due to higher volumes from its major Brucutu mine in Minas Gerais state, in southeast Brazil, with the increase of high-silica sinter feed production by dry processing taking advantage of a very favorable market environment; and seasonally better weather in Serra Norte and a strong performance in Serra Leste in its northern system, with the latter mine achieving its full capacity of 6 million mt/year, it said in the report.

In addition, Vale achieved higher productivity in Itabira Complex, with the reassessment of temporary tailings management solutions, higher third-party purchases and wet processing production in Fábrica during the tests to resume beneficiation plant operations, it said.

Platts Iron Ore and Metallurgical Coal Specifications Tree

Vale resumed loading activities at ship loader 6 at the Ponta da Madeira Maritime Terminal, in São Luís, Maranhão during the quarter, after five months’ maintenance due to an equipment fire. Maintenance at ship loader 6, involving substitution of 60% of its components, did not impact Ponta da Madeira Maritime Terminal’s monthly iron ore shipment schedule for the year, it said.

However, progress on recovering pre-Brumadinho production levels is considered slow by some observers amid iron ore fines prices which rose to their highest ever of $233/mt delivered China in May.

“Vale’s Q2 iron ore, copper and nickel production were lower than expected, although iron ore sales met our expectation,” said Jefferies International analyst Chris LaFemina in a July 20 note. “Full-year iron ore production guidance of 315-335 million mt is maintained, but hitting even the bottom end of this range would require a strong second half. Doable, but risk is to the downside. This follows Rio’s iron ore miss and is bullish for iron ore, in our view.”

Vale noted that the start-up date of some operations have been revised due to the time required to receive their respective authorizations. These included the Vargem Grande conveyor belt resumption, now expected for Q3 2021, continuation of Fábrica’s wet processing production, also expected for Q3, and extra safety works at the Torto dam at Brucutu, now expected for H2 2022.

Coal output grows

Vale’s Q2 coal production grew 63% from a year previously to 2.09 million mt. This was also up 91.8% on quarter. This “solid growth” was due to improved productivity after a major plant revamp concluded in the previous quarter, and production is ramping-up in line with the plan to reach the annual production rate of 15 million mt/year during the second half of 2021 at its Moatize mine in Mozambique.

Of the total Q2 output, metallurgical coal accounted for 980,000 mt, up 40.5% on the year and 75.8% on Q1.

At 113,000 mt in Q2, manganese ore output was 24.2% down on the year due to adjustments in the mining plan at Urucum for both safety and sustainability reasons. The output rose 24.2% on Q1 levels, due to the end of the rainy season and improved performance at the beneficiation plant in Morro da Mina.

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