Brazilian iron-ore giant Vale has set an ambitious goal two years after a major dam disaster that was followed by coronavirus-related disruptions: producing 450m tonnes of iron ore per year by the end of 2022.
That is welcome news for capesize bulker owners after the Eduardo Bartolomeo-led miner's Brumadinho dam gave way in January 2019, slashing the producer's annual output amid company-wide infrastructure testing and maintenance stops.
40m tonne hike
Vale has done its best to dig up as much of the essential steel ingredient as possible since the breach that killed more than 200 workers, resolving to come up with from 315m tonnes to 355m tonnes this year.
Next year, it will strive to up that ante by at least 27%, if the market calls for it.
"So we are ready to bring back the 400m tonnes and we are building the extra 50m tonnes," executive vice president Marco Spinelli said during a first-quarter call with analysts.
"This is 450m tonnes."
Spinelli said Vale is on its way to reaching its "mantra", as he calls the production goal, because it has received the licences to add 50m tonnes of capacity to 400m tonnes at present and the country is heading into the June dry season.
"So we're counting on that to improve our production and you can affirm that we have our guidance in perspective," he said.
Vale has to have that iron-ore capacity and its fleet of 170 bulkers at the ready to meet projected demand that is driven mostly by China's insatiable appetite for the commodity, he said.
"Why? We want to be reliable with our target of 400m tonnes and we can use an extra 50m if the market demands that," he said.
"So that's our mantra. We're going to decide these as we evolve in the market."
Vale's ambitions and China's iron-ore demand mean at least one thing for dry bulk shipping, said John Kartsonas, founder and managing partner of asset-management advisory Breakwave Advisors.
"A new multi-year high is now within reach, and that would confirm a higher low/higher high pattern, which should provide a significant confidence boost in an already booming dry bulk market," he wrote in his monthly report on the sector.
"Currently, capesize rates are above $35,000 per day, while panamax rates are $22,000 per day."
Vale reported first-quarter net income of $5.55bn, up from $4.81bn in the prior quarter.
