More from Vale overnight via the SMH blog:
Vale’s iron ore selling prices during the quarter were “materially below our and consensus estimates”, says UBS analyst Andreas Bokkenheuser. “As iron-ore prices continue their decline, we expect Vale’s earnings and share price to come under further pressure in the coming quarters”.
Vale also warned of an oversupply in the iron ore market, as more production goes online, particularly in Australia.
“For the first time in these last 10 years, we’re experiencing a different situation, in which supply has surpassed demand,” Vale’s head of ferrous metals and strategy, Jose Carlos Martins. “At the same time, demand has risen slower than expected.”
Up to 150 million metric tonnes of additional iron-ore supply could hit the global market this year, with even more additional production expected in following years, according to a recent report by Standard Bank.
While policies put in place by China to curtail monetary expansion were driving recent declines in iron-ore prices, the effect probably would be temporary, Martins said.
“We expect that the price in the second half would be better than the first half,” he said. “Nothing is for sure but the price will not fall below $US110 on a sustainable basis.”
Spot on in the first instance and completely wrong on price!
