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Vale sees 2019 iron ore shipments up to 75 million mt under prior forecast: CFO

Brazilian miner Vale’s iron ore shipments in 2019 are set to total between 50 million mt to 75 million mt below its prior forecasts due to its recent troubles, Chief Financial Officer Luciano Siani Pires said during a company conference call.

“The initial budget before [the] Brumadinho [tragedy] was 382 million mt of iron ore in shipments for 2019,” Siani Pires said. “Our expectations for an optimistic scenario impact is 50 million mt, while in a more conservative scenario the impact would be 65 million mt to 75 million mt.”

The outcome would depend on operations at the Brucutu mine, which are currently on hold.

Vale expects its 2019 shipments to be higher than its output during the year, as it plans to use stocks built up in 2018 to boost the former.

Production, Siani Pires said, would see a maximum cut of “92 million mt … due to any review that Vale would be doing in 2019.”

The domestic market continues to be the company’s priority in terms of shipments. “Vale is not measuring efforts to supply to the local market, although higher freight costs could impact this,” Siani Pires said.

The company said it is not a priority to revise or increase its output and operations, instead the security and repairs to affected areas were at the top of its list. In that sense, it said its idle capacity requires about three years to return to action due to the need to hire staff and provide equipment.

“Where it could, Vale was already doing the dry processing. Our goal of 70% dry processing in 2023 has not yet been revised, but there is the plan to accelerate it,” said Siani Pires.

The 2019 impact on pellet shipments is expected to be 11 million mt in a conservative scenario, it said.

“We do not see a situation worse than this. For the time being, the domestic market is supplied and is the priority, but if we lose more pellet capacity this could affect the internal market. In Brucutu’s case, if we can bring the operation back, that number has an upside. Brucutu and [the Timbopeba mine] are important to the internal market,” Siani Pires said.

The company’s pellet premium for 2019’s contracts were already fixed, but the absence of 11 million mt from the international market — around 8% to 9% of all the seaborne market — would make a difference to prices. “The sub offer in the market represents more than the low finished steel margins currently,” Siani Pires said.

Vale currently has Real 16.55 billion ($4.19 billion) in funds tied up due to actions by the Brazilian courts, Siani Pires said.

“We’d like the situation to stabilize as we believe the amount blocked is already sufficient, but we don’t know,” he said

Vale has no capital expenditure expectations so far for 2019, he added.
Source: Platts

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