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Vale (NYSE:VALE) recently announced plans to cut 25 to 30 million tonnes of unprofitable iron ore production and replace it with cheaper operations, the Australian Financial Review reported. The company is sticking with its supply target of 340 million tonnes of iron ore, placing more pressure on its iron ore rivals.
Vale (NYSE:VALE) recently announced plans to cut 25 to 30 million tonnes of unprofitable iron ore production and replace it with cheaper operations, the Australian Financial Review reported. The company is sticking with its supply target of 340 million tonnes of iron ore, placing more pressure on its iron ore rivals.
As quoted in the publication:
Shares in Vale jumped almost 9 per cent on Monday night after a senior executive confirmed it would cut production by 25 to 30 million tonnes, as it had foreshadowed earlier in the year.
However, Vale is sticking to its supply target of 340 million tonnes this calendar year, meaning the high-cost tonnes it is taking out the market will be replaced by lower-cost iron ore.
Barclays analyst Amos Fletcher said Vale was not providing price support for the market, but doing “quite the opposite by effectively lowering the cost curve”.
“In effect they are replacing low-quality, higher-cost iron ore with higher-margin material,” Mr Fletcher wrote in a note to clients. It is also likely to swap in some stockpiled ore, which it can sell at very high margins because the mining costs have already been absorbed.
Click here to read the full article from the Australian Financial Review.