July 16, 2018 / 11:38 AM / in 4 months

Vale iron ore output up as rail network helps against trucker strike

RIO DE JANEIRO (Reuters) - Brazil’s Vale SA on Monday reported second-quarter iron ore and pellet production that was a record for an April-to-June period, using a vast rail network to get around the effects of a trucker strike that rattled the country’s economy in May.

Vale’s 2,000 kilometers (1,240 miles) of railways helped protect the world’s top iron ore producer from the nationwide protest over diesel prices, getting goods to port and delivering key inputs to mines and processing plants.

Iron ore output reached 96.76 million tonnes in the second quarter while pellet output hit 12.84 million tonnes. That was better than 81.95 million tonnes of ore and 12.78 million tonnes of pellets in the first quarter, when rains hurt ore output.

The miner said it is on track to produce more than 200 million tonnes of iron ore in the second half of 2018, which suggests it could achieve its goal of 390 million tonnes this year.

Vale, also the world’s top nickel producer, cut its nickel production forecast to 250,000 tonnes this year, versus 263,000 previously, citing its strategy “of pursing value over volume” and current market conditions.

Vale’s nickel production in the second quarter was little changed from a year earlier at 66,200 tonnes, but sales fell 13 percent to 61,600 tonnes.

Vale said combined sales of iron ore and pellets rose to a record 86.5 million tonnes in the second quarter.

An anti-pollution campaign in China has boosted demand for Vale’s top-quality iron ore. Higher quality ore produces more steel for each tonne that is processed and can reduce emissions as less coke is used in production.

“With quality premiums at multi-year highs and reassuring signals on China’s drive to improve air quality, we believe the investment case remains compelling,” BTG Pactual analysts said in a client note.

The northern system, comprising Vale’s Carajás and S11D mines, rose 11.4 percent from a year earlier to 46.2 million tonnes as S11D operations ramped up.

In May, Reuters reported that the company expected its iron ore output at S11D to reach 58 million tonnes this year, above an official forecast of 50 million to 55 million tonnes.

The truckers’ strike, which forced unpopular President Michel Temer to reduce diesel prices through a mix of subsidies and tax cuts, is expected to cut into results across industries.

Economic activity in May suffered its biggest monthly drop since the central bank’s index started in 2003.

Reporting by Alexandra Alper and Marta Nogueira; Editing by Frances Kerry and Steve Orlofsky

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