Vale, the world's biggest iron ore producer, announced Thursday in a Brazilian regulatory filing that its first quarter net income declined 33 percent from a year ago to US$1.36 billion as iron ore output and sales fell due to the global economic crisis. Furthermore, Vale said it estimates global investment in the mining industry may fall by $60 billion this year.
Vale's investments, excluding acquisitions, fell to US$1.7 billion in the first quarter, which is roughly the same amount invested in the same period last year, but down 50.5 percent from the fourth quarter of 2008.
On the bright side, iron ore sales to China set new records in the quarter, with revenues from China rising from 17.2 percent (of total revenues) in the first quarter of 2008 to 44.7 percent in the Q1 2009. Vale sold an average of 12 million metric tons of iron ore per month to China in the first quarter, compared to the 2008 monthly average of eight million mt.
Roger Agnelli, Vale's CEO, said, commenting on the company's first quarter results, "The first quarter was the bottom in terms of all types of problems we could face right now," He added, "Overall, the market is not getting worse. It's not recovering yet but it's no longer getting worse."
In late April, Vale reported that its overall iron ore output fell 37 percent in the first quarter from a year ago, while its pellet production fell 73 percent.
Going forward, Vale said that it is focusing on financial and operational flexibility while seeking to maximize efficiency and minimize costs to continue facing the global economic crisis.
Chief Financial Officer Fabio Barbosa said that Vale will explore alternative pricing systems, as it will adopt a flexible iron ore pricing policy and will accept alternatives to annual contract prices if clients desire so.
Mr. Barbosa cited the company's increased sales to China in the first quarter, amid the sharp downturn in US and European demand, as an example that "reflects Vale's capacity to adapt to radical change."