Vale has predicted that prices of iron ore will hold up this year thanks to a recovery in demand from Chinese construction in the second half and lower exports from Indian mines.
The world’s largest exporter of iron ore by volume also outlined an ambitious logistics strategy for Asia, saying it expected to resolve a dispute in which Chinese ports are refusing access to Vale’s new fleet of large bulk carrier ships.
“We really hope that the second half [of 2012] will be much better,” said Murilo Ferreira, who took over as chief executive last year.
“China continues to have huge infrastructure needs, mainly on housing – they have to build at least 10m houses a year in order to cope with the deficit they have.”
The comments came after Mr Ferreira delivered his first full-year results as chief executive as the company set new 12-month records for sales and profits but suffered a weaker fourth quarter from lower iron ore prices.
Iron ore prices averaged $141.80 a tonne in the fourth quarter, 11 per cent below a year earlier and 20 per cent less than the previous quarter, according to Reuters data, on the back of weaker Chinese demand and the eurozone crisis.
Chinese buyers switched from a contract system of purchases to one based on spot prices to take advantage of the softer prices.
“As we expect 2012 average iron ore prices to be 10 per cent lower year on year and iron ore volumes to remain flat year on year, we do not see clear catalysts for share prices to rally,” Credit Suisse said in a client note.
Vale shares were down 1.19 per cent at R$41.58 in afternoon trade compared with a 0.08 per cent fall for the benchmark Bovespa index.
But Mr Ferreira said that while Chinese demand would be slightly weaker, iron ore supply from India has slowed sharply from 120m tonnes in 2009 to only 75m tonnes last year. “We believe the market price has some resilience,” he said.
Vale said it expected Chinese authorities to accept the company’s new “very large ore carriers”, known as Valemaxes, which are part of a drive to control its freight costs.
Spurred on by the Chinese shipping industry, ports in China have refused access to the vessels, citing safety concerns.
“China needs the ore and I think as time goes by, all these things will be solved in a good manner,” said José Carlos Martins, head of iron ore and strategy.
He said the company was developing a logistics hub in Malaysia that would open by 2014 and had started operating a transshipment facility at Subic Bay in the Philippines to distribute iron ore to smaller ports in Asia, including those accessible through rivers.
Ore could be delivered by the more efficient very large carriers and then distributed shorter distances from these hubs by higher-cost smaller carriers.
This would enable Vale to better compete with rivals based in Australia, which have lower freight costs for exports to Asia.
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