According to Murilo Ferreira, Vale’s CEO, the company expects to be China’s largest iron ore supplier, surpassing Australian competitors BHP Billiton and Rio Tinto, currently the leading exporters of the commodity to the Asian country.
Ferreira told Chinese media that Vale sells about 180 million mt of iron ore to China each year, however, recent deals inked with Chinese firms will help the Brazilian miner to set up a distribution center in China to deliver up to 250 million mt of the commodity, 38.9 percent up from its actual shipments to the Asian nation.
Vale has recently inked affreightment contracts (COA) with Asian companies, including China’s ICBC and South Korea’s Pan Ocean, among others.
Ferreira said such a target is feasible because the company’s long term vision is actually better than market projections. Ferreira estimated iron ore will be traded at prices between $65/mt and $80/mt in the long term, up from $56/mt.
The executive’s estimates contradict Moody’s recent projections for the commodity, which said prices for the commodity should reach $40-45/mt in the long term. “They’re always trying to impose their philosophy to Vale. I don’t agree with these calculations,” he said.
The reduced costs for the Brazilian commodity to be shipped in China is another factor that supports Vale’s plans to increase iron ore shipments to China.
Recently, Vale said it expects to reduce the cost of the iron ore it ships to China. According to company’s estimates, the S11D project could allow the company to reach a $14-19/mt landed cost once the S11D project is completed.