Iron King Vale Is Expected to Post Record Output in Volatile Market – by R.T. Watson (Bloomberg News – July 19, 2017)

The reigning iron-ore king Vale SA is expected to set another quarterly production record, giving investors more to ponder in what has been a seesawing year for the main steel-making ingredient.

On Thursday, the Rio de Janeiro-based company probably will report second-quarter output of 91.4 million metric tons, including third-party purchases, up from 86.8 million a year earlier, according to the average estimate of six analysts surveyed by Bloomberg News.

Vale is coming off its biggest-ever production year, churning out 348.8 million tons in 2016. It’s projecting 360 million to 380 million tons this year for an even bigger share of the market. The record-setting pace has been fueled by the development of low-cost reserves in northern Brazil, including ramping up the industry’s biggest project, S11D.

While the rise in Vale’s output has been steady, prices haven’t been. Iron ore rallied to almost $95 a ton in February before tumbling to $53 in mid-June as glut fears resurfaced. Now prices are back above $70 after an up-tick in demand from Chinese steel mills.

With Vale and its main competitors Rio Tinto Group and BHP Billiton Ltd. keeping the market well-supplied, iron ore probably will come back down to average $47 next year, Goldman Sachs Group Inc. said in a June 29 report.

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