Vale S.A. (VALE), the world’s largest iron-ore supplier, reportedly plans to hike its iron ore production to full capacity next year, helped by the global economic recovery. Vale’s iron ore production fell by about 30 million tons this year from about 302 million tons in 2008. However, the company believes that next year, its iron ore production will rebound to about 300 million tons.
Returning to growth after the impact of the global financial shock, Vale had last month announced strong operational and financial results for the third quarter of 2009. The improved performance reflects the company’s underlying earnings power based on its world-class assets and strategic position, its efforts to weather the global downturn and the widening of the economic recovery.
In the last quarter, operating revenue was $6.89 billion, down 43% from the previous year’s $12.12 billion. Revenue from ferrous metals was $4.37 billion, while revenue from nonferrous minerals reached $1.99 billion. EBITDA was $3.01 billion compared to $6.37 billion in the year ago quarter. Vale posted a net profit of $1.68 billion compared to $4.82 billion in the third quarter of 2008. Net earnings rose from $790 million in the previous quarter as markets recovered.
We expect the demand for iron ore to remain strong in China due to the strong steel demand and the lack of competitiveness of local iron ore production. Greater demand from China may drive metal prices next year. Strong growth in Chinese iron ore import is being supported by the substitution of high-cost local production and increasing carbon steel production. Management at Vale sees the future as promising. The company has invested more than $60 billion in the recent years and has made major acquisitions, which is likely to boost metal production in the future.
Read the full analyst report on “VALE”
Zacks Investment Research
