Cia. Vale do Rio Doce Chief Executive Officer Roger Agnelli said iron-ore price talks are nearing a conclusion and that the company expects to spend less than previously expected this year because of lower costs.
Vale is waiting for rivals BHP Billiton Ltd. and Rio Tinto Group to reach an accord with Asian steelmakers before deciding prices for the coming year, Agnelli told reporters today in Sao Paulo. Most clients prefer benchmark contracts and a price accord will be announced in coming weeks, he said.
Vale last month introduced a temporary 20 percent discount on prices for the steelmaking ingredient in recognition of lower demand, Agnelli said. World steel output plunged 23 percent in the first quarter from a year earlier, according to the Brussels-based World Steel Association.
“No conclusion starts to bother everyone,” Agnelli said of the annual benchmark talks, in place for about 40 years. “Steelmakers need to negotiate with their clients also.”
Last year, BHP and Rio, which mine most of their iron ore in Australia, won annual price increases of 85 percent or more after demand surged, more than the 65 percent Vale received. Benchmark prices this year may drop 40 percent because of lower demand for cars and building materials, Goldman Sachs JBWere Pty said March 17.
Steelmaking clients this year must choose between buying ore on the benchmark system or at spot market prices, Agnelli said today.
On May 7 Vale’s Chief Financial Officer Fabio Barbosa said that Vale is “ready to explore” alternative pricing systems for iron-ore. Agnelli told investors on a call the same day that if clients prefer, the company would have “no problem” in selling on the spot market, which represents a change of direction in the company’s sales policy.
Vale will invest $10.5 billion this year as lower costs and a weaker Brazilian real push spending down from a previously announced $14 billion, Agnelli said. The company will give a revised spending plan next month, he said.
Vale said April 16 it postponed the startup of its Onca Puma nickel mine in Brazil’s northern Para state until January 2010 because of the slump in demand for the metal used as an alloy in stainless steel.
“If we were to do all projects scheduled for this year, we would spend $10 or $10.5 billion,” according to Agnelli. “That would be the most if all went well.”
Vale also said today that it negotiated an agreement with Brazil’s Banco Bradesco SA to boost credit lines for its small- and medium-sized suppliers. The goal is to provide at least 120 million reais ($58 million) in financing this year to strengthen the local economy in areas where the company operates.
Source: Bloomberg
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