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Brazilian mining giant Vale is not seeing any slowdown in the global iron ore market despite a growing crisis in Europe and a weak U.S. economy, Chief Executive Murilo Ferreira said in an interview on Thursday. Ferreira told Reuters he expects prices to remain strong as rising incomes and infrastructure spending in emerging markets, particularly China, keep driving demand for the steel ingredient. As president of the world's top iron producer, his comments support the view that demand from China and other developing nations is compensating for weakness in Western economies. "Life continues as normal for us," said Ferreira during an interview at the Rio de Janeiro-based company's headquarters. "That issue of the crisis in Europe and the United States has until now not touched iron ore markets." Ferreira said the company has not had to cancel any iron ore shipments. He noted that spot market prices for iron ore have risen above $180 per tonne despite slipping in the wake of market turmoil that began in early August. "China enacted various macroprudential measures and raised interest rates three times -- and despite that, growth was around 9.5 in the second quarter," he said, highlighting China's booming construction industry as a driver of demand. He said the giant Carajas mine in northern Brazil will boost production to 140 million tonnes per year by 2013 from 100 million tonnes per year now, and to 230 million tonnes by 2015. Quarterly iron ore prices, based on average spot prices earlier in the year, should stay steady in the fourth quarter from the third quarter, Ferreira said. The New Caledonia nickel project, formerly known as Goro, will begin producing finished nickel in the last quarter of 2011, Ferreira said, after technical problems left Vale producing an intermediate product. The company has said its ambitious $24 billion investment plan originally slated for this year will not be completed until the end of the first quarter of 2012 due in large part to slow acquisition of environmental licenses. "Vale's year will have 15 months instead of 12," Ferreira said. The firm is still completing its 2012 investment budget. GOV'T TIES Ferreira, 58, took his position in May after President Dilma Rousseff led a campaign to push out former CEO Roger Agnelli following complaints by government officials that Vale was not investing enough at home to build steel mills and help Brazil's economy. Agnelli's ouster stoked concerns that investors' interests would lose out to those of the center-left government, which has boosted the state's role in key areas of the economy. Though Vale is a private company, the state has influence through state development bank BNDES and state-linked pension funds, which are important shareholders. Investors applauded Ferreira's designation, but the company's stock is nonetheless down nearly 19 percent from highs in January, in part on concerns of state interference. He said government leaders are pleased Vale is contributing to Latin America's largest economy, but declined to confirm that relations with the government have thawed since Agnelli, a brash investment banker, pleased investors with hard-charging deal-making but struck state leaders as arrogant and aloof. "Vale has a range of services that it offers Brazil, in helping the trade balance, in paying taxes, in the projects that it develops," Ferreira said. "I'm convinced that the government is also happy with what's happening. Those occasional conflicts of the past cannot overshadow all of the benefits that Vale provides Brazil." Ferreira has spent his first four months globe-trotting to Vale operations, meeting government leaders in Africa and chatting with workers at Carajas, where he watched thousands of workers as they changed shift after dawn last Saturday. That contrasts with his previous job as partner at a hedge fund that was walking distance from his house. But Ferreira says he still finds time to get his work done and stay fit by maintaining firm discipline and insisting on punctuality despite Brazilians' penchant for being fashionably late. Vale, the world's second-largest mining company and Brazil's second-largest firm by market capitalization, is a key stock for emerging market investors seeking to take advantage of strong commodities prices. Vale press release |
