Vale and Emirates Steel have signed a deal that would have the Brazilian iron ore producer ship enough iron pellets to Abu Dhabi to meet the company’s 6-million tonne per annum requirements.
The world’s largest iron ore producer, Brazil’s Vale (NYSE:VALE), has signed a four-year agreement to provide iron ore pellets to Emirates Steel in the United Arab Emirates.
The deal, which was announced on Monday (November 5), would see Vale ship iron ore product to meet the Emirati company’s annual steelmaking requirements of 6 million tonnes per year.
According to Emirates Steel, it possesses the only integrated steel plant in the UAE.
“The agreement with Vale comes in line with Emirates Steel strategy, which aims to secure flexible source of iron ore at competitive, stable and long term prices,” said CEO of Emirates Steel, Saeed Ghumran Al Remeithi.
“This new partnership plays a vital role to further strengthening the growth of our steel production in Abu Dhabi, as well as realizing our vision of being a world class steel manufacturer providing the highest quality products, services and solutions to our customers and maximizing returns to our shareholders,” said Al Remeithi.
Emirates Steel is part of the government of Abu Dhabi’s ‘industrial diversification policy’ (away from oil), providing materials for construction within the Emirates and the Gulf States.
It produces finished steel products at a rate of 3.5 million tonnes per annum, after reaching that capacity in 2012 following a US$3-billion expansion program.
“We are confident that this long-term supply contract will give us more flexibility to better serve our customers, achieve our business targets and to continue our focus on operational excellence. We are delighted to have signed this agreement with Vale and look forward to working closely together,” said Al Remeithi.
The four-year contract will run between 2018 and 2021, with Vale capable of providing iron ore pellets from its Omani processing operations established in 2007, as well as its wider global portfolio of iron ore mines.
Executive director at Vale, Peter Poppinga, said that “the long-term agreement resembles the two companies visions combined in long-term partnership (and) also shows Vale’s strong willingness to support the Middle East steel making industry through leveraging on competitiveness, productivity and performance with high quality products.”
Vale and Emirates Steel have a long relationship, with the Brazilian company shipping iron ore pellets to Abu Dhabi beginning in 2008 when it announced it was shipping half a million tonnes annually as part of a seven-year contract.
On the NYSE, Vale was trading at US$15.39 at 3:00 p.m. EST on Monday, down 0.39 percent.
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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.