Brazilian miner Vale has played down fears that its new low-cost iron ore expansion program will flood the market later this year, with a top executive revealing that export growth would occur gradually over several years and will not only be aimed as Asia.
Vale is in the final stages of its $US14.5 billion “S11D” iron ore expansion project, which will create a new mine capable of supplying 90 million tonnes per year plus new rail and port facilities in northern Brazil.
The project is the major factor behind analyst forecasts for the iron ore market to move from a balance in 2016 to over-supply in 2017. But Vale’s executive director of ferrous minerals, Peter Poppinga, said the project’s arrival would be more subtle than the market was expecting, because rail capacity would not increase by as much as mine capacity.
“Currently we are running our whole northern system at a pace of up to 155 million tonnes per year. In the coming years the S11D [mine] ramp up will reach the 90 million tonnes nominal capacity and the railway capacity will increase to 230 million tonnes per year. This will add 75 million tonnes to the seaborne market compared to today´s situation,” he told The Australian Financial Review.
“This all won’t happen in only one year but over a period of more than three years, it’s not 90 million [tonne] net increase but 75 million [tonnes].” The comments could soothe fears about a wall of new supply hitting the market and hurting prices.
The S11D ores boast some of the highest iron grades in the world at about 66 per cent, and the product is therefore likely to sell at a premium to the benchmark iron ore price, which is for iron grades of 62 per cent.
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