Brazilian miner Vale SA will place caution before capacity as it seeks to avoid driving down the iron ore market and presses forward with its recovery from a deadly dam break in 2019.
Speaking at an interview during the Reuters Commodity Trading Summit, Luciano Siani, chief financial officer for Vale, says that the miner is prepared to raise its capacity using safer and less polluting methods to 450 million tonnes in about five years – almost 50 percent more than forecast production for 2020.
“We are going to be responsible and we are not going to overflow the markets with iron ore,” he adds, asserting that the miner would not use full capacity if an expected surge in manufacturing-driven Asian demand does not materialise.
“The intent is not to oversupply the markets towards 450 (million tonnes). It is to have the capacity available to meet the market if the need be,” Siani explains.
As the only global iron ore miner with sizeable plans to expand capacity, Vale’s production decisions affect prices of steel products around the world. Its path to growth includes new mines in the north of Brazil, as well as reviving production at some of its older mines in the country’s traditional mining heartland of Minas Gerais.
In the third quarter of this year, the miner briefly recovered its status as top global producer after raising output slightly above its Australian competitor, Rio Tinto, the Reuters report points out.
The Australian firm overtook Vale after a deadly dam burst in the city of Brumadinho in 2019 left 270 people dead and obliged the Brazilian miner to shut down other risky dams holding mining waste.
“Everyone understands that the big swing factor in supply is Vale,” Siani says. “The good news is that the capacity is here, the mines are here, the processing plants are here, the railways are here.”
Although Vale reported losses last year following expenses related to the Brumadinho disaster, revenue continued to rise. A reduction in world supply after Vale shaved around a quarter from its production target for 2019 helped to fuel a surge in iron ore prices, which hit a six-year high in mid-September, Reuters says.
The mining firm says that it aims to eventually neutralise its indirect greenhouse gas emissions – it is expected to announce its first targets for ‘Scope 3’, which refers to emissions anywhere upstream or downstream the supply chain, as soon as next month.
Furthmore, Siani asserts that Environmental, Social and Governance (ESG) targets will be key moving forwards for Vale, as it looks to recover credibility with investors. By the time it reaches 400 million tonnes in about two years, the company expects to be a benchmark in safety and to eliminate the share discount over its peers, he adds.
“ESG plays a big part of what Vale intends to be in three years’ time, it is not all about production,” he concludes.