Vale to price all Carajás sales on Metal Bulletin 65% Fe Iron Ore Index

Brazilian iron ore producer Vale plans to price 100% of its Carajás sales contracts based on Metal Bulletin’s 65% Fe iron ore index among initiatives intended to improve the prices it achieves for its products.

Carajás-origin iron ore accounted for 38% of the company’s overall sales in the second quarter of 2017.

Output from the Northern System – which comprises the Carajás, Serra Leste and S11D mining areas – amounted to 148.1 million tonnes in 2016, or 42.5% of Vale’s total production.

“The 65% Fe premium increased in the third quarter of 2017 [to more than] $20 per tonne,” the miner said in a report published last month. “Vale is best positioned to reap the benefits of the flight to quality in the iron ore market.”

High-grade iron ore has been subject to robust demand from Chinese steel mills this year as they focus on maximising their productivity to take advantage of high steel margins and to limit emissions in response to government directives.

The gap between Metal Bulletin’s 65% Fe Brazilian index and Metal Bulletin’s 62% Fe iron ore index hit a historic high of $25.17 per tonne on September 15.

The gap was $23.08 per tonne on Tuesday October 17.

Other initiatives
Vale has also flagged other initiatives through which it expects to improve achieved prices. These include lowering the production of high-silica content ore by 19 million tpy and limiting silica content to 5% in Brazilian Blend Fines (BRBF).

The miner expects to enhance its average price premium to $3.70-4.70 per tonne in the second half of 2017, compared with $1.20 per tonne in the second quarter and $2.30 per tonne in the first quarter, it said.

It also expects an additional gain of $400-600 million in adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) in the second half through price realisation improvements, it said.

Increasing pellet production by 10 million tpy, marketing low-alumina products and expanding sales denominated in Chinese renminbi are the other measures the company expects will help it to achieve higher prices.

Deepali Sharma

July Zhang


Deepali Sharma

July Zhang

October 17, 2017

18:35 GMT