BHP, RIO Overtake Embattled Vale

Australian iron ore giants, Rio Tinto, and BHP have moved to the top of the global pecking order thanks to the problems besetting its Brazilian rival, Vale.

Vale revealed overnight Wednesday (Australian time) that output of iron ore dropped by 11.1% year-on-year and sales slid more than 20% in the first quarter of 2019.

That was due to the impact of the January 25 mine dam walls disaster at Brumadinho in the southern state of Minas Gerais and heavy rain in the north of the country – where the company’s biggest and most productive mines are based – which damaged transport links, slowed production and shipments and port operations.

The company said on Wednesday night, Australian time, that it produced 72.87 million tonnes of iron ore in the three months to March, down from 81.95 million tonnes in the first quarter of 2018, and just over 100 million tonnes in the December quarter of 2018.

Vale’s iron ore sales dropped by 22.2% in the first quarter, to 55.42 million tonnes, from 71.22 a year ago and more than 81 million tonnes in the final three months of 2018.

The company reaffirmed its previous guidance for iron ore and pellet production to be at the lower end of the range of 307 million tonnes to 322 million tonnes for 2019 – that’s down around 60 million tonnes from 2018.

One outcome of these falls is that Rio Tinto replaced Vale was the biggest iron ore miner in the world in the March quarter, even though its production fell. And Rio and BHP jumped above Vale in terms of sales.

Rio produced 76 million tonnes of iron ore in the three months. Rival BHP produced 63.6 million tonnes, which was down on the year. Vale produced 72.87 million.

In terms of sales both Rio and BHP topped Vale for the first time. Vale’s iron ore sales were 55.42 million tonnes, Rio sold 69.1 million tonnes and BHP sold 62.8 million. Vale also sold 12.31 million tonnes of pellets, but even after adding those into its total, of 67.7 million tonnes, Rio Tinto was still Number 1.

Global iron ore prices eased a touch on Wednesday, dipping 58 cents a tonne to $US95.57 a tonne for 62% Fe ore delivered to northern China, according to the Metal Bulletin Index.

Tonight Vale releases its quarterly financial data – the 20% plus lift in prices in the first quarter might be enough to offset the slide in sales

The big imponderable is what happens to the company’s biggest mine in its southern mining system – the 30 million tonne a year Brucutu operation.

A court decision on Tuesday halted wet processing of iron ore at the mine (around 25 million of the mine’s 30 million tonnes a year capacity). Dry processing is continuing with an annual capacity of five million tonnes a year.

Vale reckons it can get the new ban removed in a new round of hearings in the not too distant future.

The Brucutu mine was shut down on February 4 following a court order, after which Brazil’s environment agency withdrew the licence to operate the Laranjeiras tailings dam on February 4.

Vale’s previous Brucutu update was on April 17, when it said operations would resume in 72 hours after the court order. The mine has been back in operation, but Tuesday’s new court order halted most operations.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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