Vale's Q2 Production Volumes Drop Y/Y, Up Q/Q


Vale S.A. (VALE) reported disappointing second-quarter production volumes for most of its commodities. Most products including nickel, copper, coal, manganese and potash suffered a year over year decline; with only iron ore, pellets and manganese recording an increase. On a quarter-over-quarter basis, production of iron ore, pellets, coal, manganese and phosphate rock increased, while that of nickel, copper and potash decreased.

Production of iron ore reached a record level in the second quarter, growing 12.6% year over year to 79.4 million tons. The increase was primarily due to favorable weather conditions and improved production in Carajás Plant 2 and the new Conceição Itabiritos plant in the Southeastern System.

Pellet production increased 2.4% to roughly 10 million tons owing to better performance of the Samarco mine. Coal output reached 2.2 million tons, 23.8% higher than in the first quarter, largely backed by stronger performance of Carborough Downs and Moatize mines.

Nickel production totaled 61,700 tons, 8.6% lower than in the previous quarter. The decline was a result of planned maintenance work carried out in the Sudbury acid plant and furnaces. Further, manganese production dropped 18.1% year over year to 505,000 tons, owing to a decline in Carajás Azul manganese mine.

Vale is expected to release its second-quarter 2014 results on Jul 31. The Zacks Consensus Estimate for the same is pegged at 44 cents, reflecting a year over year decline of 29.0%.

With a market capitalization of $75.0 billion, Vale holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Alderon Iron Ore Corp. (AXX), Olympic Steel Inc. (ZEUS) and ThyssenKrupp AG (TYEKF). Each of these stocks carry a Zacks Rank #2 (Buy).

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