Miner Vale upbeat on metals markets, sees recovery

Posted by Peers

October 29, 2009

Brazilian miner Vale on Thursday predicted continued growth in metals markets driven by strong demand from China and global economic recovery, a day after reporting a year-on-year profit loss of 65 percent.

Vale (VALE.N)(VALE5.SA), the world’s largest iron ore producer, on Wednesday reported third-quarter net earnings of $1.68 billion, down from the commodities boom highs of last year but more than twice that of the previous quarter.

“The global economic recovery is likely to be sustainable, in our perspective the downside risks are diminishing,” said Vale Chief Financial Officer Fabio Barbosa in an earnings conference call. “We continue to be extremely confident in the future of our company.”

He said much of this growth has been driven by emerging market economies, and expects particularly strong demand growth from China, the world’s top steel producer and largest importer of iron ore.

Growth in China’s real estate market and the replacement of low-quality domestic iron ore for imported ore are signs of economic stabilization and genuine growth of demand and not the speculative buying that some analysts see.

“This has nothing to do with speculative demand, this is the result of actual growth taking place in carbon steel output combined with a replacement of domestic ore for imported ore,” Barbosa said. “We have no expectations of a reversal of demand.”

China’s daily steel production matched the previous month’s record in September and its iron ore imports hit a record as well as industrial production picks up.

But market observers expect China’s iron imports may decelerate sharply as low-quality ore mines there are expected to return to operations following the rise in prices over the quarter after closing operations earlier.

Barbosa declined to give projections on future volumes of iron ore output, which hit 68 million tonnes in the third quarter compared to 86 million tonnes a year earlier.

Vale’s stock was up 5.81 percent to 40.05 reais on the Sao Paulo stock exchange, rising along with commodities around the world.

RIO DE JANEIRO, Oct 29
Reporting by Brian Ellsworth; Editing by Christian Wiessner
Reuters
Thu Oct 29, 2009

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