Vale to lose iron ore share as Brazil tightens mining rules
Wednesday, 23 May 2012 | 00:00
Vale, the largest iron ore producer, is poised to lose market share to Australian rivals Rio Tinto and BHP Billiton as Brazil imposes stricter environmental rules on new mining projects and labour costs soar.
Brazil’s share of the seaborne iron ore market may sink to 27 percent by 2016 from 31 percent now, as the country boosts capacity by 188 million tons, according to industry data. Australia will probably add about 502 million tons, taking its market share to 50 percent from 41 percent.
Vale, based in Rio de Janeiro, delayed the $8 billion (66bn) Carajas Serra Sul expansion and other projects in Brazil last year amid environmental permit issues, higher costs and labour shortages. The firm also cut its 2015 iron ore output estimate by 10 percent to 469 million tons and is weighing asset sales as it focuses on metals production.
“We are becoming less competitive,” Jose Fernando Coura, the president of the Brazilian Mining Institute, said yesterday. Getting approval for a new project was “a Calvary because you need to go through 350 000 institutions”, he added.
Melbourne-based BHP Billiton said last month that fiscal third-quarter iron ore output surged 14 percent to 38 million tons as it expanded Australian mines and ports. London-based Rio Tinto’s production gained 9 percent to 45.6 million tons, while Vale’s dropped 2.2 percent to 70 million after bad weather hindered operations.
Mining groups are boosting output to meet Chinese demand as the country’s growth stokes demand for steel in cars, appliances and construction. Chinese steel production reached a record in March as new plants ramped up.
Australian iron ore output may climb to 940 million tons by 2016, compared with an expected 519 million tons for its South American rival, according to Bloomberg data.
Still, Vale’s low production costs and the high quality of its ore might prevent it from losing the lead in the market, said Alan Glezer, an analyst at Banco Bradesco.
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