Falling profits for Vale – by Reuters and Star Staff (August 6, 2013)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Battered by falling iron ore and nickel prices, Vale on Wednesday is expected to report a 30% drop in second-quarter profit to $1.85 billion US from a year earlier, analysts are predicting. If so, it would be Vale’s eighth consecutive quarterly profit fall, according to the average preliminary estimates of seven analysts surveyed by Reuters.

Most of the decline is due to a 12% drop in average iron ore prices and a 38% decline in nickel prices, more than offset-t ing increases in volumes shipped by the world’s No. 1 iron ore miner and No. 2 nickel producer.

Its shares have been the worst performer among the world’s big five mining companies, down 27% this year, despite a rally from nearly four-year lows in July. Of the big five, Rio Tinto, Brazil’s Vale, Glencore Xstrata and Anglo American are expected to report sharp drops in profit.

They have been slammed by weaker copper, iron ore and coal prices as they struggle to sell off assets. Anglo — the first of the diversified majors to publish results — said last week underlying operating profit fell in the six months to $3.3 billion, ahead of a consensus estimate of $3.12 billion.

The standout is BHP Billiton, which has lifted copper, coal and iron ore output despite falling prices, and is reaping the benefits of a controversial push into shale in the United States, producing more oil and gas as prices rise.

Commodities trader and miner Glencore will report on Aug. 20 its first set of earnings since it completed the takeover of Xstrata.

It has not published proforma numbers, meaning there are no consensus numbers for the group for comparison.

Analysts, though, expect a dip in headline profit on weaker coal, nickel and zinc prices. It could also book write-downs after the Xstrata deal.

The focus, however, is likely to be less on earnings and more on hints as to the outcome of Glencore’s 100-day review after the Xstrata deal — even though the full results of that analysis will not be presented until Sept. 10.

Vale and Glencore are two key Sudbury employers, with more than 5,000 people on their combined payrolls.

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