Murilo Ferreira, CEO of Brazilian mining giant VALE (NYSE: VALE), knows how to talk his book – he’s regularly been the most optimistic about the direction of the iron ore price of the large producers.
The Rio de Janeiro-based miner’s first quarter results disappointed with earnings falling 19% and sales of $9.5 billion coming in more than $1.5 billion below expectations in large part due to lower iron ore realized prices.
During the earnings call Ferreira was undeterred:
“We expect that the price in the second half will be better than the first half. One thing is for sure the price will not go below $110 on a sustainable basis. I think we have many time seen the price going below this level, but recovering very fast […] because those are the level that many producers mainly in China will leave the market
Ferreira, at the helm of the $70 billion firm since May 2011, does caution that since supply is going to be steady, his prediction would depend on improvement on the demand side “not only in China, but outside China.”
The good news is that Vale is already seeing early signs of a pick-up in Europe. Europe is responsible for 18% of Vale’s business compared to 33% for China.
As the Asian country’s demand slows as expected it should put Vale in a relatively better position than the number two and three producers Rio Tinto (LON:RIO) and BHP Billiton (LON:BHP).
Vale has been struggling to keep up with the Pilbara producers which enjoy cheaper shipping to China, but Vale’s cutbacks has seen cash costs for iron ore production trimmed to $21.60 a tonne.
Vale plans to lift exports from the current 311 million tonnes per year to 450 million tonnes by 2018. As giant projects like S11D in the Carajas complex come on stream Vale says going below the “psychologically important” $20 is achievable.
For the rest of this article, click here: http://www.mining.com/vale-iron-ore-price-to-improve-second-half-of-the-year-22405/