Vale forecasted iron ore prices to stay above $50/mt in China in H2 if demand continues strong, a company’s executive said.
According to Peter Poppinga, Vale’s ferrous director, steel demand in China has improved, supported by the credit easing started in H2 2015.
“I’ve never seen Chinese steel inventories so low, even with record output [volumes] in June and in July, so this means demand has been strong,” the executive said while talking to analysts and investors on a Q2 conference call.
Poppinga also said capital spending to maintain existing mines is close to reaching its peak and could decline slightly.
“We’re optimizing our supply chain, but it’s reaching a limit. It’ll probably still go down a little bit further, but it’s probably close to a healthy limit, and this is sustainable,” he said.
Luciano Pires, Vale’s CFO, said the company doesn’t plan to use its cash to fund new expansion or takeovers.
“Vale will not engage in expansion plans like we did in the past because the market isn’t there. So, therefore there is only two directions to go, so the debate on where to use the excess cash when and the time comes, I’d say would be a very nice moment to be in and certainly dividends will have a key and large role on that definition,” he said.