Brazil Pellet Co Samarco's 3Q Output Picks Up Pace - Report
September 10 2009 - 10:59AM
Dow Jones News
Iron-ore pellet output at Brazil's Samarco Mineracao S.A.
accelerated in the third quarter, mainly on orders from China and
demand recovery elsewhere, the Valor newspaper report Thursday.
Samarco's production reached 4.2 million metric tons in July and
August, compared to just 5.4 million tons for the whole of the
first half of the year.
Samarco is jointly-owned by Brazilian mining giant Vale S.A.
(VALE) and its global competitor, Australia's BHP Billiton Ltd.
(BHP).
Samarco's commercial director, Roberto Caravalho, said he
expected to export 14.7 million tons this year, compared to 17.1
million tons in 2008.
According to Carvalho, China took 40% of Samarco's 9.6 million
ton output in the January to August period, but European and Middle
East steel mills were also aiding sales recovery.
European steel mills cut production by more than 50% in the last
quarter of 2008, while many Middle East steel mills were closed,
owing to cheap imports from Eastern Europe and Russia, he
explained.
Now the two markets are buying pellets again.
"They are taking pellets almost at their normal pace, but with
the short and medium term in mind. There is still some caution
about the long term," said Carvalho.
"There's no conviction that the crisis is over. That's why we're
working with three-monthly orders, despite the long-term contracts
we have with our clients," he added.
"Before the crisis, we worked on orders of up to 18 months," he
added.
Carvalho also said price was key factor in increased pellet
demand.
Pellet reference prices were cut by 48.3% in 2009 long-term
contracts with European and Asian mills, except China.
Sinter feed prices were only cut by 28.3% and pellets have
become more competitive.
"Many steel mills are preferring pellets at this price, because
it's more economical in steel production," said Carvalho. "Demand
for pellets is greater than for iron ore at the moment."
The company has a production capacity of 21.6 million metric
tons of iron-ore pellets.
-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086;
John.Kolodziejski@dowjones.com