Vale chief rejects talk of iron ore supercycle

Iron ore is not at the forefront of a new supercycle, and we expect demand for steelmaking raw materials to level off a few years after the current tightness, according to the head of the world’s largest mining company.

Eduardo Bartolomeo, CEO of Vale in Brazil, said the record rise in iron ore prices over the past year is very different from the boom in the early 2000s driven by China’s rapid industrialization. It was.

“In the last supercycle, urbanization took place in China. It was a structural change. Demand shock,” he told the Financial Times. “We’re not currently talking about a big shock in demand. I think it’s the limit. It’s not a shock.”

But he added that prices could continue to rise until 2023 as the global economy recovers and iron producers operate at or near capacity.

“There is strong debate about cuts, but China is still producing more, Europe is back, and the United States is announcing huge stimulus. Supply is also limited,” he said. It was. “This market will be tight for a while. At least two years.”

Iron ore Led an extensive rally of commodities Over the past year, it has risen more than 150% to a record high of over $ 230 per ton before comparing profits to $ 209.35 on Friday, mainly against the backdrop of strong demand from Chinese steel mills. Did.

Analysts believe prices can remain at current levels as China’s steel production continues to expand, but states that the market will be very volatile.

The turbocharged performance of iron ore has benefited major producers, including Vale, which requires a break-even point at a price of only about $ 50 per ton.

It instigated the story of the new commodity supercycle — caused by a structural boost to demand, where supplies are usually slow to react for long periods of time, when prices remain above their long-term trends.

next A deadly dam disaster that killed 270 people two years agoVale, primarily a company employee and contractor, was forced to cut production.

Its production has dropped from the planned 400 million tonnes per year in 2019 and 2020 to about 300 million tonnes, and the company has successfully produced about 330 million tonnes each in the past two times. Lost its position as the world’s largest iron ore producer. Year.

Bartolomeo said iron ore was a “high fixed cost business” and eventually Vale would need to increase production to 400 million tonnes. But he said the company would do so in a “very fast-paced way” with safety in mind.

Erik Hedborg, an analyst at CRU consultancy, said Vale’s journey to 400 million tons would take a long time as “many mines need to be restarted and undergo some complex licensing process.” Said.

In the medium term (from 2025 to 2030), Bartolomeo said Vale expects demand for iron ore from China to decline as the use of scrap in electric arc furnaces increases.

“Everyone talks about the circular economy. Scrap will come to China. It must. You can see that the demand for iron ore from China is declining.”

Bartolomeo said there is also a shift to higher quality iron ore as the steel industry seeks to reduce emissions by shifting to less polluting steelmaking methods such as hydrogen-based production.

“All roads lead to high quality iron ore, and Vale is in a very good position for that,” he added.

Vale chief rejects talk of iron ore supercycle Source link Vale chief rejects talk of iron ore supercycle

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