The chief executive officer of iron-ore giant Vale SA signed four deals with Chinese counterparts during Tuesday’s visit by Premier Li Keqiang to Brasilia, including a credit agreement potentially worth as much as $US4 billion ($5.05 billion).
The Rio de Janeiro-based miner also scooped up $US445 million from divesting four of its huge iron-ore ships and agreeing to sell four more carriers to a Chinese shipping firm.
Vale will need the money as SD11 sucks it dry for another two years. Poor old Twiggy really is the only one that can go under. The other major iron ore players are all rock solid:
- BHP and RIO are too big and cheapest
- Vale is a national champion in Brazil and will never fail
- Anglo has deep pockets and other divisions that pump cash
- Roy Hill is an exceedingly rich woman’s vanity project
- Sino is a strategic play, as are other mines like Tonkolili
Between them they will produce roughly 1.25 billion tonnes of seaborne iron ore within two years. The current market is 1.34 billion tonnes but, in my view, it will shrink over the next three to five years as Chinese steel production falls faster than its iron ore mines close. The pace of decline is open to debate but it’s quite possible that the above majors will be enough within three years and will all be cutting production within five.
As the major iron ore miner music winds down, there’s nowhere for Mr Forrest’s 160 million tonnes to sit.
