Bloomberg News - July 5, 2011 By Juan Pablo Spinetto and Firat Kayakiran The opinion expressed in this article does not necessarily reflect the opinion of TVIPacific. It is meant for information purposes only for our readers. This is thepersonal opinion of the author only.
Vale SA (VALE3), the world’s largest iron-ore producer, sees noslowdown in demand from China as the country seeks to build 36 million low-incomehouses in the next five years, Chief Financial Officer Guilherme Cavalcantisaid. The country will continueleading global consumption of the steelmaking raw material as it invests in newdwellings and infrastructure, Cavalcanti said on Bloomberg Television’s “ThePulse with Maryam Nemazee” today in London. Difficulties in bringing new projects to theproduction stage will cause a demand-supply imbalance lasting six or sevenyears, he said. “We aren’t feeling anycontraction in demand for iron ore mainly because infrastructure building isstill going on in there and also social housing,” Cavalcanti said. “Theurbanization process in China is far from over, so we think that these willkeep leading the demand for iron ore.” China’s factory index fellto the lowest level since February 2009 last week, adding to concerns that 12reserve- requirement increases and four interest-rate increases since the startof last year are curbing growth in the world’s second- biggest economy. Valeshipped about 41 percent of its total iron ore and pellets sales to China inthe first-quarter. The dollar today ralliedversus the euro, snapping a six- day drop, on speculation China’s efforts totame inflation will cool growth and damp demand for riskier assets. The U.S.currency climbed against 14 of its 16 major peers after the Beijing-basedEconomic Information Daily said China is likely to raise interest rates this weekend. Market Tightness
“The tightness of themarket, because of the difficulties in many companies to deliver the projectsto put supply on, will probably leave the market imbalanced for six to sevenyears,” Cavalcanti, 42, said. Vale last week cut itslong-term iron-ore output forecast by about 10 percent to 469 million metrictons by 2015. The company said earlier this year that it delayed the start offour projects for as many as two years amid equipment, workforce and licensingconstraints. “Because of the delaysthat we have, we revised the figure for 2015,” Cavalcanti said today, addingthat Vale is maintaining this year’s target at 311 million metric tons. No ‘Bidding War’
Prices for iron oredelivered to China, the largest user, jumped 27 percent in the past year andhave more than doubled since 2009. The price of ore with 62 percent ironcontent delivered to the Chinese port of Tianjin gained 0.2 percent to $168.5 ametric ton today, according to the Steel Business Briefing CommoditiesResearch. Vale, which is aiming toboost copper output almost fivefold to 1 million metric tons by 2015, in Aprilbid $1.1 billion bid for Johannesburg-based Metorex Ltd.(MTX) Jinchuan Group Co., thebiggest Chinese nickel producer, today offered 8.90 rand a share for thecompany, trumping Vale’s 7.35 rand a share offer. “We aren’t concerned aboutthe bidding war because we have our limit on price,” Cavalcanti said. “And wewill not go to a bidding war.” “We already are leaders iniron-ore, we are the second largest in nickel and we really want to increase incopper, coal and fertilizers,” Cavalcanti said during the interview. “The focusin terms of regions in the world would be Africa and Indonesia because there are places where you can still find highgrades in unexplored mines,” he said. Vale will only issue bondsthis year if there is a “market window with very good rates” as the companycurrently doesn’t need the funding, Cavalcanti said. “At the moment I have noplans,” he said. Vale fell 72 centavos, or1.5 percent, to 46.33 reais in Sao Paulo trading. The stock has dropped about 4percent this year, less than the 9 percent decline in Brazil’s benchmark Bovespa Index. To contact the reporter onthis story: Juan Pablo Spinetto in London at jspinetto@bloomberg.net. Firat Kayakiran in London at fkayakiran@bloomberg.net To contact the editorresponsible for this story: Dale Crofts at dcrofts@bloomberg.net John Viljoen at jviljoen@bloomberg.net Bloomberg News
|