Vale SA plans to lower its iron ore output amid lower prices

Published on October 20, 2021 02:59 PM AEDT

Vale SA plans to lower its iron ore output amid lower prices — Image source: Iron ore mine | Source: © Alfotokunst | Megapixl.com

Highlights

Vale SA plans to slow down the production of low-margin iron ore in the fourth quarter by nearly 4Mt.

The significant decision of the miner came into play after a collapse in iron ore prices in China.

Vale had produced 89.42Mt iron ore in the third quarter.

One of the leading iron ore miners of the world, Vale SA said on Tuesday that it is going to slow down the production of low margin iron ore in the fourth quarter by nearly 4Mt due to low prices and could cut back output in 2022 if prices did not rise.

The Brazilian miner said in the filing of securities that iron ore output for the remaining year is expected to fall in the lower half of its target range that is currently set between 315-355Mt.

Vale also said that it would reduce its iron ore offerings by 12-15Mt in 2022 if the current scenario remains the same and didn't change.

The significant decision of the miner came into play after a collapse in iron ore prices as China, the world’s leading importer of iron ore reduced the production of steel on environmental concerns.

Iron or tumbles

The prices of Iron Ore Fine China Import 63.5 percent grade tumbled below US$120 per metric tonne after touching US$129 per metric tonne in the mid of October. The effects of the financial crisis of Chinese property firm, Evergrande remains a threat to industrial metals.

Additionally, the ongoing power shortage in the country is expected to continue into winter while production curbs in the country are already hurting households and companies.

Vale had produced 89.42Mt iron ore in the third quarter, nearly 0.8% higher than the previous corresponding year.

Bottom Line

Vale SA plans to reduce the production of iron ore in the fourth quarter due to the lower prices of the base metal. The miner also stated that it could cut back the output in 2022 if prices of iron ore don’t rise.

Arpit Verma

Author

Arpit Verma - Research Analyst
292 Posts
Arpit is Research Analyst at Kalkine Media Pty Ltd. He has a wide experience of around 6.5 years in the oil & gas, mining, energy, and commodities domain. He has completed his M.Tech in Petroleum Engineering and B.Tech in Geoscience Engineering from ...

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