At Vale Day, company emphasizes iron ore production flexibility amid challenging scenario
12/06/2024
Vale CEO Gustavo Pimenta said the company is studying the Bahia Mineração (Bamin) project but no investment decision has been made. He commented on the topic on Tuesday (3), during Vale Day, a company meeting with investors, at the New York Stock Exchange. It was the first time the mining company spoke about considering the project.
“Bamin is one of many projects we evaluate, but there’s no approval yet. It’s simply due diligence that our team must conduct,” Mr. Pimenta told journalists in an interview following the event.
Bamin is a mining company operating the Pedra de Ferro mine in Caetité, Bahia, owned by Kazakhstan’s Eurasian Resources Group. The project also includes a segment of the West-East Railway (Fiol) and a port terminal in Ilhéus (Bahia) for iron ore shipment. Behind the scenes, there are rumors that the federal government is interested in Vale acquiring the asset, which is expected to require around R$30 billion in investments. This information was reported by columnist Lauro Jardim of “O Globo.”
During Tuesday’s (3) presentation at Vale Day, Mr. Pimenta emphasized that the company’s projects must align with its Vision 2030 framework: a superior product portfolio, customer proximity, and a results-oriented focus.
This vision is intended to help the company navigate a more challenging global landscape in the iron ore market in the coming years. Executives highlighted uncertainties ahead, such as the anticipated slowdown of China’s economy, potential increased protectionism in the U.S. steel market, and possibly weaker demand for iron ore.
Despite these challenges, the tone of the presentations suggested that Vale has enough flexibility to deliver strong results in iron ore over the coming years, based on the three pillars of its Vision 2030.
Mr. Pimenta, who took on the CEO role in October and attended his first Vale Day as the head of the company—previously serving as the CFO—stressed that the company considers $50 per tonne as the breakeven price for iron ore, the level at which it can sell without incurring losses. The commodity currently hovers around $110 per tonne, with market speculation of a potential drop to $90 per tonne next year.
To prepare for the anticipated market conditions in the coming years, Vale is banking on the strength of its production, product quality, and cost structure. On Tuesday (3), the company updated its iron ore production forecast, projecting about 328 million tonnes by the end of 2024, increasing to between 325 million and 335 million tonnes next year; between 340 million and 360 million tonnes in 2026; and stabilizing around 360 million tonnes by 2030.
By the end of this period, the production of agglomerates, which are higher-quality inputs aiding steel clients in decarbonization, is expected to reach between 60 million and 70 million tonnes. By 2030, the company’s average portfolio is projected to have an iron content of 63% to 64%, considered high by industry standards.
Among the projects expected to significantly increase the company’s capacity is Capanema in Minas Gerais, adding 15 million tonnes to production with tests commencing earlier than planned. Vargem Grande 1, also in Minas Gerais, is set to add another 15 million tonnes, and the S11D+20 project in Pará is anticipated to contribute an additional 20 million tonnes of iron ore with 65% iron content.
In the base metals sector, copper was a highlight at Vale Day, with current production of around 350,000 tonnes annually. The start-up of the Bacaba and Alemão projects by 2030 is expected to ensure production between 420,000 and 500,000 tonnes, with projections of approximately 700,000 tonnes between 2030 and 2035.
*By Francisco Góes, Kariny Leal e Rafael Rosas
Source: Valor International