(Bloomberg) -- Producers don’t typically talk down the price of their commodities. But that’s what Vale SA is doing with iron ore.
The Brazilian company, which lost the title of world’s biggest iron-ore supplier in the wake of a tailings dam disaster last year, doesn’t see support for high prices in the short to medium term as it ramps up output in the pandemic, executives said on an call Wednesday.
While demand from Chinese steel mills continues to be strong, consumption elsewhere is still weak and producers have shown they can keep mines running in the pandemic. The stabilization of Covid-19 cases in northern Brazil was part of Vale’s decision to resume dividend payments.
The prospect of virus-related disruptions in Brazil helped iron ore futures surpass $100 a ton for the first time since August, with Vale’s operations seen as the swing factor for the market’s supply-and-demand balance.
Now Vale says it can build on a second-quarter production recovery to reach its annual target range. With its S11D high-grade complex in northern Brazil hitting its straps and the return of mines halted after the dam disaster, Vale looks like reclaiming top spot from Rio Tinto Group.
All that would mean less supply risk and price support.
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