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Vale SA produced more than analysts expected and outperformed both the previous quarter and the year-ago period, as part of an ongoing recovery from the 2019 tailings dam disaster and thanks to better weather.
But with iron ore futures down more than 40% from their mid-July peak and highly volatile amid Chinese restrictions on steel production and concerns about that nation’s housing market, Vale is trying to defend margins.
Its production and sales strategy is based on market conditions, prioritising value over volume, with the aim of maximising margins.
The Brazilian mining giant churned out 89.4 million tonnes in the third quarter compared to analysts’ average estimate of 87.3 million tonnes, showing that the recovery is on track.
The company is cutting low-margin ore supply by a total of 4 million tonnes in the fourth quarter, and possibly another 12-15 million tonnes next year.
Bloomberg’s baseline scenario shows a structurally overloaded iron ore market from the end of 2022, with surpluses until 2024. Vale’s tonnage return, which ships high-grade ore, is expected to account for most of the supply growth.
Vale is also one of the world’s leading nickel producers and a major supplier of copper. Production of both metals fell after a strike at its Sudbury complex cut annual guidance. The company expects to have Sudbury operations back to normal this month and to resume its Totten complex early next year after mine shaft repairs.