Corporate Brochure: Vale leading with innovation and out of the box thinking (Endeaver Magazine – January 2015)

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Headquartered in Brazil, Vale is a global mining company that has set themselves a mission to transform natural resources into prosperity and sustainable development. Standing as the second largest producer of nickel, they are also the leaders in the production of iron-ore and present in over thirty countries across the world. The company’s footprint is as indelible as the minerals they mine and with their recent construction of the Valemax ships, their footprint is set to deepen and extend even further.

“Our operations span five continents,” Claudio Alves, Global Director Sales and Marketing says, “And are diversified across several sectors including metals, coal, fertilisers, logistics, shipping, energy and mining.”

“The industry is one of the most important in the world,” he says, “And it is up to Vale to establish parameters to determine how we conduct ourselves ethically and sustainably.”As the head of marketing and sales, Claudio is a key figure in a highly competitive and at times, controversial industry.

With much being said about the ethics of sourcing and mining limited minerals from the earth, what is seldom mentioned is that ores and the refinement of them provides vital materials for a number of indispensable items such as mobile phones, computers and even large-scale airplanes. Manufacturers of these valuable assets rely on companies like Vale to provide them with high quality ore, which Vale takes great care to source ethically and sustainably.

As the world’s largest producer of iron, Vale are in a position to influence the sustainability of not only their own operations but the ethical production of their suppliers. Thanks to their investments into technology and logistics, they assure continued efficiency and growth throughout their operations and with a logistic network that integrates mines, railroads, ports and ships across Brazil, Indonesia, Mozambique, Oman, the Philippines and Argentina, Vale has created a working mechanism. This process carries the ore from the initial research and development stage all the way through to mining and extraction and eventually to processing and refinement.

Do They Have The Minerals?

Mining laterite/saprolite nickel, Vale produce nickel matte, an intermediate product that is mainly shipped to Japan. Nickel is most commonly used in combination with other metals to form alloys due to its versatility and resistance to oxidation and corrosion. It retains its characteristics, even when subjected to extreme temperatures and can therefore be used in many products and applications including televisions, rechargeable batteries and CD/DVD pressing.

Despite a deepening supply glut that saw iron-ore trade at a five-year low, Vale exceeded financial and business analysts’ estimates and posted record quarterly outputs as well as starting new projects.

In a statement, Vale noted that iron-ore output, excluding production from its share of the Samarco Mineracao SA venture, had climbed 3.1 percent to 85.7 million metric tons, beating the 83.3 million average of seven analysts’ estimates compiled by Bloomberg. Vale’s copper and nickel output also exceeded forecasts.

A host of expansions at the Rio de Janeiro-based company, in addition to those at its two main competitors, BHP Billiton Ltd and Rio Tinto Group, have seen a global surplus in the seaborne iron-ore market that UBS AG estimates will reach 26 million tons this year. Despite prices plunging 40 percent in 2014, Vale is on course to produce as much as 320 million tons this year, a number far above its estimates.

Now, with such production, expansion and growth taking place, you would be forgiven for assuming that the cost of this company’s success is as much ecological as it is fiscal but you would be mistaken. In fact, Vale’s production lines operate with clean energy, generated by 12 hydroelectric power plants and nine small hydroelectric power plants, which currently, generate 59% of its needs worldwide.

Who Is Leading This Innovative, Forward Thinking Company?

Vale SA is captained by President and CEO Murilo Ferreira, who has over thirty years of experience in the mining industry. Appointed as President and CEO in May 2011, after joining the board only six years earlier, his career has always revolved around the bottom line. He now leads the company with a sense of direction that can be backed up not only by Vale’s reputation but also its transparency.

Ferreira is also a long standing employee of the company, having begun his professional career at Vale in 1977 as a financial and economic analyst before moving upwards to embrace important roles such as CEO of Vale Inco, currently part of Vale operations in Canada.

Long standing employees are nothing new at Vale, who employ over 80,000 people worldwide and have nurtured the sort of loyalty that is rarely seen in such large companies.

“We offer a dynamic, challenging work environment,” Claudio explains, “As we believe that it is important to stimulate development among our employees.”

A focus on employees is a focus on people and Vale is highly invested in their Social Management Plan and Integrated Community Development program. Recognising that they are in the position to directly influence the minds of future generations of employees, it is important for Vale to invest in the youth of today in order to bring about the most skilled, experienced and proficient staff of tomorrow.

“With investments in technology and concern for the environment, we believe that mining brings prosperity and sustainable development,” Claudio says. He goes on to highlight that Vale, as a mining company, has a recognised record in carbon emissions per unit of revenue. In addition to their environmental endeavours, Vale is dedicated to long-term development in local communities, promoting education, culture and well-being in its areas of operation.

“Over the last five years,” Claudio says, “we focus on health and safety to minimise workplace accidents. On a daily basis we encourage awareness-raising, reflection and valuing life, promoting a health and safety culture at the company.”

A staggering number of people work with Vale, either as direct employees or as contractors and it is expected that Vale employees strictly adhere to the company values, which include; Life Matters Most, Value Our People, Prize Our Planet, Do What is Right, Improve Together and Make it Happen.

Claudio goes on to make it clear that detailed training had to be put in place to handle such a large score of staff and that all employees receive comprehensive training in their specific areas.

“Mining requires a workforce that is usually not found in the market,” he says, “Therefore, developing people is critical to ensure business sustainability so we created a corporate university in 2003, which is linked to strategic issues of the business.”

These issues include health and safety, sustainability, innovation and include the development of all categories: technical-operational (secondary and technical level), technical specialist (upper level) and leaders at all levels (supervisors, managers and directors).

“Do what is right” is the corporate code of ethics and conduct that directs and guides Vale SA, stimulating them to act responsibly, honestly and with respect and loyalty. These principles are to be followed by everyone who works for and acts on behalf of Vale, including Executive board members, employees, contractors and partners.

A Plethora Of New Developments

So much is happening at Vale that it is important to acknowledge some of the new developments. Take a look at the 10,000 kilometres of railroad that have been laid down in Brazil, or the impressive work Vale has done with fertilisers, to help raise better and stronger crops. The hydroelectric plants and centres in Brazil, Canada and Indonesia (Vale Soluções em Energia, which was founded in 2007) focus on the development of innovative, efficient and sustainable energy generation solution.

“One of the new developments is S11D project, located in Carajás,” Claudio says, “It has a nominal capacity of 90 million metric tons per year of iron ore, with proven reserves of 4.240 billion metric tons that has an average ferrous content of 66.7%, low impurities S11D is expected to start-up in the second half of 2016 and will deliver full capacity production by 2018. The largest project in Vale’s history, and in the iron ore industry, it will maintain Vale’s undisputed leadership in the global market, in terms of volume, cost and quality.

Another important development is the Itabiritos projects, which include the Vargem Grande Itabiritos, comprising of the construction of a new iron ore treatment plant in the state of Minas Gerais, Brazil, but it is still very much the Valemax ships that are being focussed on in the media.

The Valemax

Vale’s reputation is of the highest calibre as they approach every project with a desire to complete and improve. One of their successful projects is the construction of Valemax megaships.

A Valemax is a ship of staggering proportions. Able to carry nearly 400,000 tonnes, they are a vital part of the Vale equipment portfolio.

The Valemax ships are known as “very large ore carriers” (VLOC), designed to carry high quantities of iron ore from Brazil to European Middle Eastern and Asian ports. With a capacity ranging from 380,000 to 400,000 tons deadweight, the vessels meet the highest standard of ship construction, known as the largest bulk carriers ever constructed and some the longest ships of any type currently in service.

Construction began in 2008 when Vale placed orders for twelve 400,000-ton Valemax ships to be constructed by Jiangsu Rongsheng Heavy Industries (RSHI) in China. They went on to order seven more ships from South Korean Daewoo Shipbuilding & Marine Engineering (DSME) in 2009. A further sixteen ships of similar size were ordered from Chinese and South Korean shipyards and chartered to Vale under long-term contracts before September 2014, bringing their fleet to one of the largest in the world.

With its iron-ore mines located in Brazil, Vale does have a disadvantage when it comes to transportation costs, especially when compared to its main competitors; Rio Tinto and BHP Billiton. These companies have their mining operations concentrated in Australia, which is much closer to the major iron-ore consumers in Asia and with this in mind, the Valemax ships have become an integral part of the company’s strategy to lower transportation costs from its Brazilian ore mines to its consumers in Asia.

How Do The Valemax
Ships Work?

The Valemax ships have 2.3 times the capacity of Vale’s Capesize ships, which are usually used to navigate the route between Brazil and China. Working together with these carriers, Vale makes use of another transportation system to Asia, the floating transfer stations positioned in Subic Bay, Philippines and its recently inaugurated distribution centre in Lumut, Malaysia.

This system of trans-shipment in the Philippines provides more options for the movement of ore at ports where Valemax is unable to enter, due to size limitations. Also, these ships are always fully loaded to make complete use of their space, allowing Vale to reduce its transportation costs and capitalise on the economies of scale generated from the use of these ships.

Vale’s iron ore distribution center in Malaysia, formally known as Teluk Rubiah Maritime Terminal will serve as a strategic distribution hub to Vale’s customers in Asia. Located in the Straits of Malacca, about 10 days away from other ports in the region, the distribution center will allow Vale to reduce the iron ore delivery time to their clients in Asia and Southeast Asia, increasing its competitiveness.

Valemax Solution

Historically, the long distance from Brazil to Asian markets has caused higher shipping costs, long delivery schedules and market volatility. In early 2008, the cost to ship iron ore to China was as high as US$ 110 per ton, which was more than the cost of the ore itself. Bulk shipping market imbalances and high costs were detrimental to iron ore producers, steel mills and their downstream users. This resulted in the new generation of large ships specifically designed to carry iron ore. The design has many efficiency and safety advantages over the older class of dry bulk carriers.

Reduced carbon emissions per ton of cargo: 35% less bunker consumption and corresponding 35% lower carbon emission per ton of ore transported compared to earlier generation ships. The most environmental friendly ships in the dry bulk market – reduced SOx, NOx emissions. Future improvements will reduce emissions even more. To further reduce carbon footprint, Vale is considering possible LNG powered Valemax.

Double port efficiency and throughput: the reinforced vessel structure allows one pass loading and the geometry of the holds allows double the unloading speed, consequently shortening time at berth with 60% less berthings for the same volume of ore enabled by more than double capacity of average capesize ships achieving efficiency with reduced port queues and demurrage.

Better safety: Valemax ships are the most suitable vessel to transport iron ore as they have been specifically designed to be ‘ore carriers’. The ships’ design allows for minimal cargo movement as compared to traditional bulk carriers and its drainage system allows for reduced standing water facilitating more efficient unloading procedures by using 6 bilge wells per hold vs. 2 per hold in other bulk carriers. Hold design allows minimal movement of the ore which makes the ships more stable with about 60% fewer port manoeuvrings for the same amount of ore delivered reducing port congestion and the likelihood of accidents.

Going Forward

With the global steel industry characterised by overcapacity and a subdued pricing environment, the ability to reduce costs is a major incentive for Vale’s customers which include all Chinese steelmakers. Ports in Italy, Netherlands, Oman, Japan, Malaysia, the Philippines, Korea and China have received Valemax ships. The Valemax is a critical component of Vale’s shipping and logistics strategy. The objective is to increase efficiency in order to reduce the disadvantages of distance from Asia. Efficiency gains from Valemax ships are part of Vale’s overall strategy to increase its long-term competitiveness. Vale’s target is to sell more of the best iron ore from Brazil, faster and more competitively compared to its competitors. Vale’s strategy will enable a long-term, undisrupted and large scale supply of high quality iron ore. The economies of scale will reduce volatility, clearly benefiting its customers.

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