Asian demand ‘tsunami’ to buoy commodity prices – Vale [Canada CEO Tito Martins predicts] – by Matthew Hill (Miningweekly.com – May 6, 2011)

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If you look at it carefully it’s not a wave, it’s a tsunami. [Chinese urbanization] …
I see, for the long term, this scenario of scarcity to remain for at least five years …
I don’t believe producers will have capacity to cope with this huge movement in
urbanisation, people need raw materials…” (Tito Martins, CEO Vale Canada Ltd.
and Executive Director, Base Metals – May 6, 2011)

TORONTO (miningweekly.com) – The world’s second-biggest mining company, announcing record first-quarter profits, on Friday said a “tsunami” of Asian urbanisation would lead to shortages in iron-ore supply at least until 2016 as miners failed to keep pace with demand.

Basic materials executive Tito Martins said that debt problems in the US and Europe would not change this. “It’s a big wave coming. If you look at it carefully it’s not a wave, it’s a tsunami. The earthquake started maybe 10, 15 years ago, when China started moving huge quantities of people from the countryside to the city,” he commented on a conference call.

Martin echoed comments that Anglo-Australian miner Rio Tinto made earlier this year that China had accomplished a magnitude of industrialisation over the past two decades that had taken the Western World 250 years to accomplish.

Vale reported earnings of $6,83-billion for the first quarter – a more than four-fold increase compared with last year – as it benefitted from surging demand for iron-ore, coal, copper and nickel in countries like China.

Martin was particularly sanguine on the supply–demand balance for Vale’s main product, iron-ore, saying that the steelmaking ingredient was set to benefit the most from urbanisation in developing countries.

“I see, for the long term, this scenario of scarcity to remain for at least five years, until these new big projects start producing. Even after that you will have one or two years of a more stable environment and then [supply will be tight] again,” he predicted.

Companies including Vale, ArcelorMittal and Rio Tinto have embarked on massive new iron-ore projects in West Africa, but these take time to develop owing to a lack of infrastructure and often challenging political climates.

Martin said that companies also faced environmental hurdles in opening new mines

While there might be some hiccups along the way, he expressed confidence that urbanisation in Asia meant that demand for raw materials would put pressure on suppliers.

“For sure, we’re going to have movements here and there because of inflation and the economy… I don’t believe producers will have capacity to cope with this huge movement in urbanisation, people need raw materials and that will put pressure on prices,” he said.

Vale CEO Roger Agnelli, who is leaving the company on May 22 after pressure from the Brazilian government over how much Vale was investing in the country, was absent from the earnings call.

He will be replaced by Murilo Pinto de Oliveira Ferreira.
 
Edited by: Liezel Hill

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