Chanos is going to have an heart attack: "China’s plan to build 5.8m homes in the low-income housing segment"
Rise in ore demand powers Vale
By Vincent Bevins in São Paulo
Published: October 28 2010 23:10 | Last updated: October 29 2010 01:44
A rebound in global demand for iron ore and a new pricing regime helped VVale of Brazil, the world’s biggest iron ore miner, post record profits, revenues and margins in the third quarter.
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Potash profit surge beefs up defences - Oct-28US rare-earths concern says it can beat Chinese - Oct-27Kenmare production hit by flood - Oct-27Vale predicts bumper 2011 ore prices - Sep-29Vale plans Hong Kong share listing - Sep-24Vale said cash generation, measured by adjusted earnings before interest, taxes, debt and amortisation, rose to $8.8bn, well above its previous record of $6.4bn in the third quarter of 2008 and the $5.6bn reported in the second quarter of this year.
This year, Vale and the world’s other big iron ore miners such as BHP Billiton and Rio Tinto dropped their traditional benchmark system of one-year contracts and replaced it with quarterly price adjustments linked to the Chinese iron ore spot market.
The new system delivered price increases of 90 to 100 per cent in the second quarter.
In the third quarter, average prices for iron ore fines rose another 39 per cent.
In a presentation in São Paulo, Roger Agnelli, chief executive, said: “No other mining company in the world has the possibility of organic growth that Vale does.”
Net earnings were a record $6bn, compared with $3.7bn in the second quarter and $1.7bn in the third quarter of 2009. Vale also announced best-ever operating revenues of $14.5bn, against $6.9bn in the same period last year, and ebit margins of 55 per cent.
The company added on Thursday that it would nearly double investments in 2010 to $24bn, partly to fund expansion into fertiliser production.
“We’re seeing an extremely favourable environment in terms of prices and demand for iron ore producers at the moment,” said Pedro Galdi, mining analyst at SLW Corretora, a São Paulo brokerage.
In a note to clients, Leonardo Correa, mining analyst at Barclays Capital in São Paulo, said the better-than- expected results reflected rising demand, especially in China, stricter cost control and higher realised prices.
Vale said shipments to China had risen to 46 per cent of its total, compared with 39 per cent in the second quarter. It said China’s plan to build 5.8m homes in the low-income housing segment would further sustain demand for iron ore, and steel consumption in the country had not yet peaked.
The record results came as Brazil’s largest company is trying to dispel rumours of conflicts with the government, which has substantial indirect shareholdings in Vale and holds “golden shares”. Vale on Tuesday denied board members had discussed the possibility of replacing Mr Agnelli. |
