Vale is changing its focus: betting on cheaper ore for Chinese metallurgists
Brazilian mining company Vale, one of the largest producers of iron ore in the world, has announced plans to launch a new product, ore with a lower iron content. Deliveries are expected to start in the coming months. The main goal is to consolidate the company's position in the Asian markets, particularly in China, which remains a key consumer of Vale products. This is reported by SteelOrbis.
According to sources, Chinese metal companies that purchase more than 60% of Vale's iron ore volumes are currently operating at low profitability due to lower prices for steel products. In this context, cheaper cheese is one of the ways to improve the marginality of Chinese integrated producers. That is why Vale sees an opportunity in the supply of cheaper low-grade ore.
Currently, the premium for high-quality Brazilian ore (with an iron content of 65%) is only 6% compared to 63% Australian cheese. This is a significant drop from 20% in 2021 and indicates that the market is not compensating the company for the additional costs of enriching high-quality products.
The production of ore with a lower iron content will allow Vale to reduce the cost of processing and, consequently, the selling price. This approach may be beneficial both for the company itself and for its Chinese partners, who gain access to cheaper raw materials in the face of fierce competition and pressure on profitability.