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Vale SA

Vale sees robust demand for nickel, iron ore and coaking coal as steel production recovers

The world's top iron ore miner says it is "confident in the expansionary trend of the demand for minerals and metals" and views 2010 "as a very promising year."

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By Dorothy Kosich, Mineweb.com

Über miner Vale admitted Wednesday it faces "a tight situation as even running its iron ore mines and pellet plants at full capacity we still struggle to satisfy client demand."

In financial results released Wednesday, Vale noted, "Although the world still faces challenges raised by the global financial crisis and the policies employed to deal with its negative effects, we are confident in the expansionary trend of the demand for minerals and metals and see 2010 as a very promising year for our operational and financial performance."

The company also expects a strong demand for nickel this year.

"In order to exploit the favorable market environment, Vale is partially resuming the Sudbury operations, running the Copper Cliff smelter to feed the production of plating powder and pellets of our Clydach refinery, in Wales," Vale said in its financial results released Wednesday.

"These products, which are traded at a premium to LME prices, are in short supply as a result of the shutdown of our Copper Cliff Nickel Refinery, a major producer, since July last year," the company advised.

Meanwhile, Vale noted, "As the global economic recovery is broadening and strengthening, copper consumption is expanding at a brisk pace. In the face of the structural limitations to the supply growth of concentrates, there is fundamental support for the persistence of a relatively high price level."

In its analysis, Vale suggested the Pacific market for thermal coal has been increasingly tight while the market scenario for coking coal is similar to iron ore.

"There is robust demand growth derived from a continued steel production increase," Vale observed. "As other countries are running steel mills at increasing rates of utilization, the market for coking coal is expected to become tighter in 2010."

As Vale invests a capex budget of US$12.9 billion-out of which $8.6 billion will be allocated to finance project development-- the company is negotiating the acquisition of Brazilian fertilizer assets "in order to proceed with the build-up of a strong asset base, aiming to achieve a global leadership position in a few years' time."

The company believes fertilizers "have a solid demand growth potential." Vale said it already has an attractive pipeline of projects in South America, North America and Africa for potash and phosphate rock, "which beget an advantageous positioning in terms of cost, quality and geography."

Vale reported a sharp fall in iron ore production last year, 237.9 million tonnes compared to 301.7 million tonnes in 2008. Nevertheless, the company did attain three new production records including coal (5.4 million tonnes), bauxite (12.5 million metric tonnes) and alumina (5.9 million tonnes).

However, Vale's finished nickel production dropped 32.2% last year from 275,000 metric tonnes to 197,000 tonnes, due to strikes at Sudbury and Voisey's Bay since July and August.

Meanwhile, Vale's copper production declined 36.5% from 312,000 metric tonnes to 198 metric tonnes.

FINANCIALS

Vale reported US GAAP net earnings of US$5.35 billion or $1 per share for 2009, down from $13.2 billion or $2.61 share for 2008.

For the fourth quarter of 2009, Vale reported US GAAP net earnings of $1/52 billion or 28-cents per share, up from $1.37 billion or 26-cents/sh for fourth-quarter 2008.

Quick facts: Vale SA

Price: $10.88

Market: NYSE
Market Cap: $55.8 billion
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