Vale Production and sales overview
Vale’s iron ore production achieved 82.0 million tonne in 1Q18, mainly due to the Vale’s decision to progressively reduce lower grade ore production from the Southern and Southeastern Systems, which resulted in 4.9% reduction when compared to 1Q17. Additionally, a more intense rain season in 1Q18, also contributed with this impact. Compared to 4Q17, production was 12.2% lower due to this amplified weather-related seasonality in Brazil.
Nevertheless, sales volumes of iron ore and pellets totaled 84.3 million tonne in 1Q18, 6.4 million tonne higher than in 1Q17, achieving a record for a first quarter, as a result of the flexibility and active management of its supply chain, optimizing price realization and margins, thus resulting in a higher sales/production ratio. In the coming quarters, the sales/production ratio will reflect the ongoing offshore blending activities, completing the build-up of offshore stocks.
Vale’s sales mix improved substantially year-on-year, as a result of S11D’s ramp-up and the decision to progressively reduce low grade ore production. The share of pellets, Carajás and blended ores increased to 76% in 1Q18 from 67% of total sales in 1Q17. Consequently, Vale’s product mix leveraged the impact of rising market premiums, driving the increase in the contributions of quality and average premium to Vale’s realized CFR/FOB wmt price that amounted to USD 5.2 per tonne in 1Q18 vs. USD 2.3/t in 1Q17 and USD 3.9 per tonne in 4Q17.
The Northern System achieved a production record for a first quarter of 40.6 million tonne in 1Q18, 12.9% higher than in 1Q17, due to the S11D ramp-up.
Average Fe content was 64.4% in 1Q18, higher than the 64.3% in 4Q17 and the 63.9% in 1Q17, due to the S11D ramp-up and the reduction in lower grade ore production aligned with the ongoing strategy to maximize margins.
Vale reaffirms its production guidance for 2018 of around 390 million tonne, as previously announced on Vale Day.
Northern System
The Northern System, which comprises Carajás and S11D, achieved a production record for a first quarter of 40.6 million tonne in 1Q18, 6.1 million tonne lower than in 4Q17 due to a heavier than usual weather- seasonality in 1Q18. Production increased 4.6 million tonne in comparison to 1Q17, due to the S11D ramp-up, which positive contribution was partially offset by the negative impact of heavier rain in Feb18 vs. Feb17 (the rainfall index reached 556 mm in Feb18 vs. 472 mm in Feb17, an increase of 18%).
Southeastern System
The Southeastern System, which encompasses the Itabira, Minas Centrais and Mariana mining hubs, produced 22.2 million tonne in 1Q18, 3.8 million tonne lower than in 4Q17 mainly due to a heavier than usual weather-related seasonality. Production was 6.0 Mt lower than in 1Q17 due to Vale’s actions to reduce supply of lower grade ore, as well as a more intense rainy season in 1Q18 (the rainfall index reached 1,001 mm in 1Q18 vs. 489 mm in 1Q17, an increase of 105%).
Aligned with the positioning of being a premium and flexible producer, Timbopeba plant resumed its operation at the end of 1Q18, with future production contributing to further improve the quality of Southeastern System’s products.
Southern System
The Southern System, which encompasses the Paraopeba, Vargem Grande and Minas Itabirito mining hubs, produced 18.5 million tonne in 1Q18, 1.5 million tonne lower than in 4Q17 due to a heavier than usual weather-related seasonality. Production was 3.0 million tonne lower than in 1Q17 mainly due to Vale’s actions to reduce supply of lower grade ore, as well as a more intense rainy season in 1Q18 (the rainfall index reached 730 mm in 1Q18 vs. 413 mm in 1Q17, an increase of 77%).
Midwestern System
The Midwestern System produced 0.6 million tonne in 1Q18, in line with 4Q17 and 1Q17.
Source : Strategic Research Institute