Luiz Meriz, Vale: Steel and Iron Ore Market Perspectives


Published on

Luiz Meriz, Head Iron-Ore Marketing, Vale delivered this presentation at the 2013 Americas Iron Ore conference. Americas Iron Ore is one of the most respected annual gatherings for North and South American iron ore markets. The agenda features iron ore industry and market developments; new project developments and expansions in North and South America; overview of steel demand; iron ore spot market price; infrastructure and transport challenges and investment opportunities.
After five successful editions, the Americas Iron Ore Conference consolidates as the largest meeting place for executives and professionals of the steel and iron ore industry in the region. For more information, please visit the conference website:

Published in: Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Luiz Meriz, Vale: Steel and Iron Ore Market Perspectives

  1. 1. Nov 11-13, 2013 – Rio de Janeiro Steel and Iron Ore Market Perspectives Americas Iron Ore Conference Luiz Meriz – Director, Iron Ore Marketing Department
  2. 2. Agenda  Short Term Outlook  Long Term Market Prospects  Vale S11D  Other Iron Ore Projects  Conclusion
  3. 3. Short term outlook
  4. 4. Manufacturing activity has been improving in the second half of this year PMI evolution in some of the main regions of the globe China US Japan Eurozone Global Oct-13 Sep-13 Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 Dec-12 Nov-12 Oct-12 Sep-12 Aug-12 Jul-12 Jun-12 May-12 Apr-12 Mar-12 Feb-12 Jan-12 60 58 56 54 52 50 48 46 44 42 40 PMI above 50 indicating expansion of manufacturing activity in all regions Sources: J.P. Morgan and Bloomberg
  5. 5. Chinese economy remains sound China’s GDP growth rebounded in 3Q13 increasing by 7.8% YoY and by 9.0% QoQ saar. A more favorable global economic environment, as well as a much clear government’s support to domestic investments were behind the better overall performance; The central government continues to encourage growth both directly, supporting investments in infrastructure and public housing building, and indirectly by creating a more favorable environment for business. GDP Total social financing
  6. 6. Advanced economies are gradually strengthening Political instability did not prevent improvement in the economic activity. US GDP is expected to rise from 1.5% this year to 2.5% in 2014, driven by a continued strength in the private demand, which in turn is supported by a recovering in the housing market, a rising household wealth, along with a reduction in unemployment rate. US Unemployment Recovery continues to gain steam gradually and achieve peripheral economies. Spain’s GDP grew in the 3Q13 after nine consecutive quarters of contraction. The Economic sentiment index gained 1.6 points in September to reach 96.9, its fifth consecutive increase, which left the index at its highest level since August 2011. Ifo survey and Europe Sentiment Index
  7. 7. Long term market prospects
  8. 8. China’s economic profile shift from infrastructure to consumption still far from reality 2030 2010 Est. 934 million ~660 million 1975 67% (urban % of total pop.) 50% (urban % of total pop.) ~160 million 17% (urban % of total pop.) 1975-2010 = +500 million (as if double the population of Indonesia had been urbanized) 2011-2030 = +275 million (Urban population grows at a CAGR of an estimated 1.6% a year till 2030). Slightly lower than the population of the USA. Despite the expected transition of the economic profile of the country in coming years, urbanization and infrastructure should continue to be the main drivers for steel consumption growth for at least another decade. Source: UN Population Fund
  9. 9. Chinese urbanization will continue to produce important effects on the demand for steel Rail network (millions of km) Airports with paved runways China China USA USA 0 50.000 100.000 150.000 200.000 250.000 million Urban households 0 1.000 2.000 3.000 4.000 5.000 6.000 Inhabitants per vehicle - 2011 Forecast Housing stock, units (units) For China to reach the same car penetration that Brazil has today, it will need to produce additional 118 million units Housing shortage Source: Gavekal Dragonomics, Mc Kinsey, Vale estimates Strong growth potential
  10. 10. There is still a long way for China to converge to the income level of advanced nations. Which cloud type China will follow? Crude steel consumption per capita (Kg) Historical relation between GDP per capita (PPP) and CSP per capita (1900 to 2011) 1,400 Japan (1980 to 2011) 1,200 South Korea (1970 to 2011) 1,000 Germany (1970 to 2011) 800 USA (1947 to 2011) 600 China (1978 to 2011) 400 India (1950 to 2011) 200 Brazil (1947 to 2011) 0 0 Source: WSA, IMF 10,000 20,000 30,000 40,000 GDP per capita (US$, 2005, Real) 50,000
  11. 11. China and other emerging regions have strong potential for steel consumption growth Expected GDP growth and current steel intensity x population size Expected GDP growth next 5 years (%) 12 Strong growth potential regions India 10 CIS 8 SE Asia (2011 data) 6 4 China 2 Countries/regions with a large population hold a strong potential for steel consumption growth, but urbanization and industrialization must continue South America 0 0 100 200 300 400 500 Steel consumption/capita (kg) 2012 Source: IMF, WSA 600 700 Reference 250 million people
  12. 12. Vale’s S11D
  13. 13. Carajás iron ore complex
  14. 14. S11D: the largest project in the iron ore industry Equipment’s Stockyards  Nominal capacity: 90 Mtpy.  Start-up: 2H16.  Total Capex: US$ 19.67 billion (including logistics) 46% completion  Stripping ratio: 0.27. Processing plants  Mass recovery: 100%.  Truckless mining, dry processing, no tailings dam and 70% reduction on greenhouse gases emissions.  Water saving and forest preservation Earthworks
  15. 15. Northern logistics capacity expansion (CLN) projects allow for transportation of current expansions and S11D volume  CLN 230 project key data  Target: 230 Mtpy (rail and port current 150Mtpy).  Expansion of PDM terminal 10% completion  Project status  Earthworks initiated for 570 km of railway duplication.  Realized capex until 3Q13: US$ 880 million.
  16. 16. S11D is the result of our constant pursuit of operational excellence  Spartan project - simplicity and functionality, with a high level of operational safety and low exposure to risk of accidents;  Sturdiness and reliability - robust plants with high level of automation;  Dry process - low water consumption and disposal of tailings dam;  High productivity  Low operating cost  Low socioeconomic impact - use of local labor and implementation of actions in partnership with local government to promote strategies to reduce workforce migration.
  17. 17. Video - S11D Project
  18. 18. Other Iron Ore Projects
  19. 19. Fully approved and committed: Vale’s iron ore mining and logistics expansion projects will require US$ 32 billion until 2018 Projects approved by the Board of Directors Volume Estimated Start up Product Expected total capex US$ bi Iron Ore Carajás Additional 40 Mtpy 40 Mpty 2H13 Sinter feed $ 3.47 bi Iron Ore Carajás S11D (mine + processing plant) 90 Mtpy 2H16 Sinter feed $ 8.09 bi Iron Ore Logistics CLN S11D Mtpy (Northern System railway and port capacity) EFC capacity to 230 Mtpy 1H15 to 2H18 - $ 11.58 bi Iron Ore Carajás Serra Leste (new processing plant) 6 Mtpy 1H14 Sinter feed $ 478 mln Iron Ore Conceição Itabiritos 12 Mtpy 2H13 Pellet feed $ 1.17 bi Iron Ore Vargem Grande Itabiritos 10 Mtpy 2H14 Pellet feed $ 1.91 bi Iron Ore Conceição Itabiritos II 19 Mtpy 2H14 PF / SF $ 1.19 bi Iron Ore Cauê Itabiritos 24 Mpty 2H15 PF / SF $ 1.50 bi Iron Ore Logistics Teluk Rubiah (Distribution Center, Malaysia) 30 Mtpy 2H14 - $ 1.37 bi Iron Ore Tubarão VIII Pelletizing Plant 7.5 Mtpy 1H14 Pellets $1.32 bi Projects : Update as from 6th November, 2013
  20. 20. We have already delivered projects to increase capacity and more are underway Additional capacity & quality  Carajás Additional 40Mtpy Expansion of iron ore processing capacity Commissioning: first ore picture Dry processing CAPEX: US$3.5 bi Fully operational by 2015 97% completion
  21. 21. 99% Conceição Itabiritos completion Quality & Extending mines life Description: New beneficiation plant to process compact itabirites. The process flow includes 6 ball mills and flotation facility.  Production capacity: 12 Mty.  Production split: 100% high grade pellet feed.  Estimated CAPEX: USD 1.17 billion.  Start-up: 2H13. Expected quality: Fe: ~67.70% SiO2+Al2O3: ~1.10% P: ~ 0.025%
  22. 22. Pelletizing Plant Tubarão VIII  Eighth pelletizing plant in Tubarão Complex  Nominal capacity: 7.5 Mtpy. 92% completion  Start-up: 1H14.  Total Capex: US$ 1,321 million  Realized capex until 3Q13: US$ 1,035million
  23. 23. 72% Vargem Grande Itabiritos completion Quality & Extending mines life Description: New beneficiation plant to process itabirites, stockyard expansion and long distance conveyor belt.  Production capacity: 10 Mty.  Production split: 100% pellet feed.  Estimated CAPEX: USD 1.91 billion.  Start-up: 2H14. Expected quality: Fe: ~67.80% SiO2+Al2O3: ~1.71% P: ~ 0.035%
  24. 24. 73% Conceição Itabiritos II completion Quality & Extending mines life Description: Refurbishment of existing Conceição plant (new process flow) to process compact itabirites. Primary crushing construction  Production capacity: 19 Mty.  Production split: 32% sinter feed and 68% pellet feed.  Estimated CAPEX: USD 1.19 billion.  Start-up: 2H14. Expected quality: Fe: ~68.10% SiO2+Al2O3: ~2.66% P: ~ 0.023%
  25. 25. 36% completion Cauê Itabiritos Quality & Extending mines life Description: Refurbishment of existing Cauê plant (new process flow) to process compact itabirites.  Production capacity: 24 Mty.  Production split: 29% sinter feed and 71% pellet feed.  Estimated CAPEX: USD 1.5 billion.  Start-up: 2H15. Expected quality: Fe: ~67.64% SiO2+Al2O3: ~2.30% P: ~ 0.017%
  26. 26. Vale’s iron ore production capacity will increase sharply Iron ore production capacity¹ (Mt) 450 306 2018e average quality parameters: Fe: > 66% SiO2 : < 2% Al2O3: < 2% P: < 0.04% 2013 2018 Additional 150 Mt of high quality ore ¹ S11D expected to reach 90Mt in 2018.
  27. 27. Conclusion
  28. 28. Main messages  Chinese steel demand has been surprising on the upside. Despite the efforts to change the economic profile, urbanization and infrastructure should remain the drivers for steel consumption for at least another decade, although at a lower pace;  Global steel consumption growth should be supported by economic recovery of advanced nations and development of emerging economies, mainly in Asia.  Vale believes in the long term fundamentals and is investing in iron ore mining and logistics expansion projects which will require US$ 34 billion until 2018, including Carajás S11D - the largest project ever developed in the iron ore’s industry;  Vale is eager to support its customers by supplying increasing volumes of the highest quality iron ore in the market.
  29. 29. THANK YOU!