Chiara Quintão and André Magnabosco
Source: O Estado de São Paulo
Published on January 19, 2011
Vale, the world’s biggest iron ore mining company, became Brazil’s largest exporter in 2010, dislodging Petrobrás, the leader since 2002. According to figures released yesterday by the Foreign Trade Secretariat (Secex), which reports to the Ministry of Development, Industry and Foreign Trade, Vale’s external sales amounted to US$24 billion – 32% higher than Petrobrás’ exports of US$18.2 billion.
Rising 122.07% since 2009, Vale’s foreign sales accounted for 11.91% of all Brazilian exports, reestablishing the leading position that the company last enjoyed in 1998. Vale’s exports were even higher than Brazil’s trade surplus, which last year came to US$20.278 billion.
Petrobrás accounted for 9.01% of the country’s exports, followed by Bunge Alimentos (2.13%, or US$4.3 billion), Embraer (2.06% or US$4.1 billion) and Samarco (1.59% or US$3.2 billion).
It is expected that Vale will retain its export leadership in 2011, according to the company’s executive director for Marketing, Sales and Strategy, José Carlos Martins. "We also produce indirect exports via Samarco, of which we own 50%. If we include this stake, the figures are even higher," he says.
Vale’s export performance is mainly the result of high iron ore prices at a time of restricted supplies of the commodity in relation to demand. Petrobrás, in turn, saw its exports of petroleum products fall in 2010, in order to guarantee supplies for the domestic market.
A recovery in volumes of ore shipments since 2009 was also fundamental to Vale’s strong performance. Preliminary figures indicate that the mining company exported 20% more in 2010 than in 2009.
The implementation of the new price-adjustment model in April 2010 has enabled mining companies to benefit quarterly from high prices for raw materials on the Chinese spot market. Under the new system, the readjustment calculation is based on the average price on the spot market, together with quality- and freight-related bonuses.
Prices
Tight demand-supply conditions for iron ore have led to successive highs in the price of the raw material on the Chinese spot market. Yesterday, the commodity’s price closed at US$182.01 per ton in China, the highest level since April.
There are forecasts that the all-time record high of US$200 per ton will be surpassed. Martins says that the quarterly price-adjustment system has lessened conflicts in price negotiations. He argues that the model serves the interests of producers and customers alike, within a scenario of high price volatility.
The mining company’s change in strategy in relation to freight has also contributed to higher prices. Following the crisis, the company started to operate more actively with regard to deliveries, hiring freight services and buying or ordering its own ships.