Brazilian miner Companhia Vale do Rio Doce (Vale) has announced that it is taking steps to change its production plans in accordance with the new global economic outlook that emerged from the recent intensification of financial market stress, and from the adverse feedback loops between the financial system and the real economy.
As the slowdown of global industrial production has also negatively impacted the demand for base metals, Vale has decided to minimize risks of much larger future costs to its shareholders, employees and the communities they operate in order to adapt its supply to global demand, avoiding unnecessary and costly inventory building. As a consequence of the proposed stoppages, many Vale employees will be laid off temporarily.
In this context, Vale will reduce its iron ore production by 30 million mt per annum through the shutdown of some mines, in the Southern and Southeastern Systems, in the state of Minas Gerais, Brazil, as of Saturday November 1, 2008, onwards. According to Vale, these are higher-cost iron ore mines with lower-quality output relatively to the average quality of the company's iron ores.
Meanwhile, two pellet plants, representing approximately 20 percent of Vale's total nominal capacity, will be shutdown for maintenance, also from November 2008 onwards.
Furthermore, Vale's manganese ore and ferroalloy operations in Brazil will be stopped from December 2008 to January 2009, whereas its Dunkerque ferroalloy plant in France will be kept idled until April 2009. On the other hand, the plant in Mo I Rana, Norway, will have its furnace maintenance extended until June 2009. These changes will impact a production cut of 600,000 mt of manganese ore and 90,000 mt of ferroalloy.
However, Vale said it will implement the capital expenditure budget for 2009 as announced, taking into consideration the confidence in the long-term fundamentals of the markets for minerals and metals.