Vale to cut iron ore production

Mega iron ore miner Vale is the first of the majors to announce a reduction its iron ore production rates.

The miner cut back its forecast for next year to address ongoing volatility in the market, oversupply and low margins, and as a reaction to the Samarco mine spill, according to Bloomberg.

It comes as iron ore reaches its lowest point in nearly a decade, falling below the US$40 per tonne benchmark.

The SGX AsiaClear future contract price for January slumped to US$39.67 a tonne, and marks a return to prices not seen since before the Global Financial Crisis, in 2007.

The MBIOI-58 Premium Index was even worse, ending the month at US$38.15 per tonne.

On the back of these momentous drops, Vale has slashed more than 20 million tons from production.

It has announced its intention to produce between 340 and 350 million tons next year, compared to the previous figure of 376 million tons.

It is instead pushing focus to its higher grade ores instead of focusing on pure tonnages.

“Trying to be the largest producer of anything in the world of metals these days isn’t necessarily a positive,” David Gagliano, a New York-based analyst at BMO Capital Markets, told Bloomberg.

Vale is also expecting a massive cash hit from the Samarco disaster, to the tune of US$443 million, as operations remain suspended, while its CEO, Murilo Ferreira, announced a snap resignation from his chairman position at Brazilian state oil producer Petroleo Brasileiro a few days ago.



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