As China’s steel sector slackens, Vale sees India as next growth engine for iron ore exports

Vale, the world’s largest iron ore producer, sees no evidence that the war has reduced ore demand and has seen margins improve as the conflict with Iran disrupts flows of raw materials, CEO Gustavo Pimenta said.

The Brazilian miner is focusing on developing its own resources rather than pursuing acquisitions, Pimenta said in an interview with Bloomberg TV in Rio de Janeiro. Global demand for critical minerals has been “super constructive” for Vale, he added.

Disruptions in the Strait of Hormuz have raised fuel prices and freight costs for miners such as Vale, which saw cost pressures offset gains from higher prices and production in the first quarter.

The company raised its free cash flow forecast for its core product, iron ore, by US$1.5 billion to reflect higher prices since the start of the war with Iran. Vale now expects iron ore to average US$112 per tonne this year, up from US$102 in its pre-conflict scenario.

Indian steel

Pimenta said he is “very optimistic” about the outlook for the year. Although China, one of the main importers of Brazilian iron ore, has probably already reached peak steel production, Vale expects demand growth to be increasingly driven by other regions, including Southeast Asia, Europe and the United States.

India will be an important growth engine, doubling crude steel production over the next decade, the CEO said.

Vale suspended operations at a pelletizing complex in Oman until the third quarter because of war-related logistics constraints. Vale’s operations in Oman have annual production capacity of 9 million tonnes of iron ore pellets, or about 29% of the company’s total output.

Pimenta said the restart will have to wait until the conflict eases. Despite the war in the Middle East, Vale sees Oman as a strategic hub for supplying customers in the region, he said.

Rare earths

Vale has been studying whether a move into rare earths would make strategic sense for the company, including by assessing opportunities in Brazil. The South American country has the world’s largest reserves of the 17 elements essential to the energy transition outside China.

Pimenta said, however, that questions remain, especially over scale and Vale’s ability to compete effectively with established international rare earth producers. For now, Vale’s priority is to focus on areas where it has expertise and scale, such as copper and nickel, he said.

Source: O Globo

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