Brazilian miner and iron ore producer Vale said Thursday during an analyst and investor tour that a few factors are driving increased demand for iron ore.
“Higher steel demand and supply restrictions led to higher steel prices and to a higher need for productivity, thus increasing demand for quality iron ore,” said Peter Poppinga, Vale’s ferrous and coal executive director.
The executive said Vale is positioned to take advantage of two macro trends: supply side reform and worldwide depletion of iron ore.
Citing the reasons for what it labeled as a supply side reform, Vale mentioned higher steel prices and margins, increased need for productivity to achieve higher steel capacity utilization, and a growing need for higher grade fines and pellets.
Additionally, Poppinga said alumina and phosphorous contents are “increasing progressively.” He noted China’s domestic concentrate volumes are experiencing a “decreasing” trend. In Australia, there has been a “stable volume” along with a decrease in quality, with more alumina and phosphorous getting into the market.
“The market needs richer iron ore. … Less contaminant and higher content (iron ore) are progressively increasing their (market) value,” he said.
Poppinga said iron ore supply by competitors “won’t replace the (product’s) current quality production, which is actually getting depleted.”
Commenting Vale’s commercial strategy, the executive said “value over volume” is the company’s new management model.