Vale SA boosted iron-ore production last quarter to the second-highest ever for the company, exceeding analyst estimates and worsening a supply glut that saw prices of the steelmaking ingredient collapse.
Iron-ore output rose 7.4 percent to 85.3 million metric tons in the quarter through June 30, compared with 79.4 million tons a year ago, the company said in a statement Thursday. The result, which excludes third-party purchases and operations at a venture with BHP Billiton Plc, topped the 82.5 million-ton average of eight analyst estimates compiled by Bloomberg.
The Rio de Janeiro-based company, the world’s top iron-ore producer, is expanding supply to a record 340 million tons this year while seeking to replace low-quality ore with premium products to improve profits. The expansion by Vale and its main rivals BHP and Rio Tinto Group coincides with an unexpected decline in demand from China, the biggest iron-ore buyer, prompting Goldman Sachs Group Inc. to forecast weaker prices in incoming quarters.
The increase in Vale’s three main production systems was driven by better-than-expected weather and expanded operations at the N4WS mine and Plant 2 unit in the Carajas complex, Vale said in the statement. Output for the first-half reached a record 159.8 million tons, 6.2 percent more than last year.
Improving Margins
“We expect to be mining even higher Fe-content ores with lower contaminant levels,” the company said, adding that it halted operations at Southern Brazil’s Feijao and Jangada plants on higher refining costs and poorer quality. “The decision is in line with Vale’s goal of improving product quality and margins.”
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