August 7, 2008
August 7th (Bloomberg) – Cia. Vale do Rio Doce, the world’s biggest iron-ore producer, said second-quarter profit climbed 22 percent to the highest ever on record contract prices for supplies sold to steel producers.
Net income rose to $5.01 billion, or $1.02 a share, from $4.095 billion, or 85 cents, a year earlier, Rio de Janeiro-based Vale said today in a statement posted on the Brazilian security regulator’s Web site. The results topped the average estimate of 91 cents a share from eight analysts surveyed by Bloomberg News.
Sales surged 22 percent after Vale won annual price increases of at least 65 percent in supply contracts for iron ore, which accounted for more than half of sales in the quarter. Still, profit was eroded as the average price of nickel, the company’s second-biggest source of revenue, fell 43 percent from a year earlier.
“The market is in a buying mood after this result,” said Daniel Gorayeb, an analyst at Spinelli SA in Sao Paulo. “The company managed to take advantage of market demands by producing more of its higher-value products and focused more on what was of interest, which conveys a positive image.”
Vale, led by Chief Executive Officer Roger Agnelli, is spending $59 billion in the five years through 2012 to increase iron-ore capacity by 40 percent to 450 million metric tons a year and double nickel and copper production. Vale raised $12.1 billion in a July share sale, the biggest ever by a Brazilian company, to fund expansion and acquisitions.
The value of Vale’s iron-ore sales climbed 72 percent to $6.12 billion in the quarter, while nickel plunged 41 percent to $1.87 billion.
Vale this year negotiated a sixth annual increase in contract prices for its iron ore, the main raw material used to make steel. Nickel for delivery in three months averaged $25,919.69 a metric ton on the London Metal Exchange during the quarter, down 43 percent from a year earlier.
Vale said profitability at its nickel operations are high because the company is a low-cost producer.
“In the medium term, the combination of a reduced level of stainless-steel stockpiles and a drop in nickel inventories creates a favorable environment for the strong recovery of prices of the metal,” Vale said in the statement.
Agnelli is seeking to expand in coal and copper as quarterly profit growth slowed from a 69 percent average in the past four years. In May, Agnelli told business leaders in Rio de Janeiro that “if Vale doesn’t grow, it will be swallowed.”
Net revenue rose to $10.6 billion from $8.69 billion in the second quarter of 2007. Vale was expected to post sales of $11.8 billion, the average of four estimates compiled by Bloomberg.
The results are based on generally accepted accounting principles in the U.S.
Based on Brazilian accounting standards, profit fell 22 percent as a weaker dollar eroded the value of exports when converted back into the local currency. Net income fell to 4.57 billion reais ($2.9 billion), or 94 centavos a share, from 5.84 billion reais, or 1.21 reais a share, a year earlier, Vale said in a statement on its Web site. Sales climbed 3 percent to 18.3 billion reais.
Most of Vale’s sales are priced in dollars. The U.S. currency fell 17 percent against the Brazilian real in the 12 months through the end of the second quarter.
Vale’s American depositary receipts gained 2.3 percent to $27.30 at 7:21 p.m. in after-hours trading in New York.
In regular Sao Paulo trading, Vale rose 1.9 percent to 36.71 reais. The stock has declined 28 percent this year, compared with a 9.9 percent drop for Brazil’s Bovespa stock index.
July 31st (Steel Guru) – BNamericas reported that Brazilian miner Vale is in the process of selecting a construction firm for its Carajas iron ore processing plant expansion project, located in the state of Para in northern Brazil.
The USD 2.48 billion project, “Carajas 130,” will add 30 million tonnes per year to the current capacity of 100 million tonnes per year. Minerconsult Engenharia Limitada, a part of the Canadian engineering group SNC Lavalin, is providing engineering services.
June 29, 2008
June 29th (Steel Guru) – It is reported that despite recent iron ore price hike negotiated by Rio Tinto, iron ore mining giant Vale would continue its leader position in global iron ore trade.
Mr Roger Agnelli CEO of CVRD told the local Estado news agency that Vale would maintain its position as a key player in the iron ore market, despite the recent breakdown in the benchmark pricing system and Rio Tinto’s possible tie up with BHP Billiton.
Mr Agnelli said that “Vale, alone, is bigger in iron ore than Rio Tinto and BHP together. So we have a very strong position in the international market. It is practically impossible to ignore the size and strength of Vale in this market.”
Mr Angelli also said that “The prices of minerals and principal global commodities remain elevated. Demand continues to be very strong, primarily in Asia. But the higher prices garnered by Rio Tinto meant an end to the traditional benchmarking system.”
He however added that “It needs to be seen whether other Chinese steelmakers will follow this price hike deal with Baosteel as well as whether Japanese steelmakers will also go along with the increase. But the market tends to have a single price. For now, we are content to observe this development.”