(VALE) Vale Will `Struggle' to Meet Iron Ore Demand as China's Economy Expands
By Helder Marinho
Feb. 11 (Bloomberg) -- Vale SA, the world’s biggest iron- ore producer, said it will “struggle” to meet demand for the steelmaking raw material this year as China’s economy expands.
“In 2010, Vale faces a tight situation, as even running its iron ore mines and pellet plants at full capacity we will struggle to satisfy client demand,” the Rio de Janeiro-based company said late yesterday in a regulatory filing. “Our largest projects are scheduled to come on stream from 2012 onwards, with a very small capacity increase in the near term.”
Vale is taking “the final steps” to resume full output at its iron ore mines after China’s economy expanded at a rate of about 11 percent in the fourth quarter, increasing steel demand from construction companies and appliance manufacturers. Vale’s shipments to China, the world’s largest iron-ore buyer, accounted for about 44 percent of iron ore sales in the quarter.
“Volumes will improve in the first quarter,” said Raphael Biderman, analyst at Bradesco Corretora in Sao Paulo, in a telephone interview. “In the second quarter there will be a positive impact of the increase in iron ore prices.”
Fourth-quarter net income rose to $1.52 billion, or 28 cents a share, from $1.37 billion, or 26 cents, a year earlier, the company said late yesterday in a regulatory filing. The company was expected to post profit of 31 cents a share, the average estimate of 13 analysts in a Bloomberg survey.
“Excluding non-recurring items, results were in line with our expectation,” said Biderman. He expects the company to conclude “soon” the negotiations on iron ore contracts with an increase of as much as 50 percent in prices.
‘Main Beneficiaries’
Vale will likely “be one of the main beneficiaries of persistently higher-than-expected iron ore prices during the upcoming years,” Leonardo Correa, a Sao Paulo-based analyst with Barclays Capital, said in a Feb. 8 report. “We’re bullish on iron ore.”
Vale said in a separate statement yesterday that it agreed to buy Mosaic Co.’s 20.3 percent stake in Fertilizantes Fosfatados SA, or Fosfertil, for $1.03 billion. Vale, which also acquired stakes from Bunge Ltd. and Yara International ASA, will hold 79 percent of total Fosfertil shares after the transaction.
Vale fell 0.1 percent to 42.20 reais in Sao Paulo trading yesterday. The stock is unchanged this year, compared with a 5.2 percent loss in the Bovespa index of traded companies.
To contact the reporter on this story: Helder Marinho in Rio de Janeiro at hmarinho@bloomberg.net
Last Updated: February 10, 2010 20:05 EST
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