Vale's Q2 Production and Sales Increase, Annual Target Expected to be Achieved at a High Level

 

Vale's Q2 Production and Sales Surge, Full-Year Target Expected to be Achieved at High Levels 📈

Part 01: Robust Overall Performance in Q2, Achieving Year-on-Year Double Growth 🚀

Vale, the largest iron ore producer in Brazil, released its production and sales report for the second quarter of 2024 on July 17th, Beijing time. The performance was very impressive compared to the same period last year. Specifically, with substantial financial support for infrastructure upgrades and maintenance, Vale's iron ore production remained stable in the second quarter, reaching 80.6 million tons, an increase of 1.9 million tons, or 2.4% year-on-year (Figure 1), marking the highest for the same period in the past four years. At the same time, there was a noticeable increase in iron ore sales in the second quarter, with a year-on-year increase of 5.4 million tons to 79.8 million tons, a significant increase of 7.3% (Figure 2).

Additionally, affected by the reduction of pellet fines at the Vargem Grande plant and the maintenance at the São Luis plant, Vale's total pellet production slightly decreased in the second quarter, down 210,000 tons year-on-year to 8.9 million tons, a decrease of 2.4%.

Part 02: Overall Stable Performance of Three Major Mining Areas, Strong Performance of the Northern System 🏭

1. Northern System: The S11D mine area performed brilliantly, setting a new historical high for the second quarter's production. The Northern System is located in the Carajás region of Para State, Brazil, and is Vale's largest iron ore production area, including three mining complexes: Serra Norte, Serra Leste, and S11D. The main product is Carajás fine powder. According to the production situation of the mine area, the increase in iron ore in the Northern System in the second quarter mainly came from the S11D mine area, which produced a total of 19.5 million tons of iron ore in the second quarter, an increase of 400,000 tons, or 2.1% compared to the second quarter of 2023 (Figure 3), setting a new historical high for the second quarter. This is mainly due to the ongoing asset maintenance plan to ensure stable production. In addition, although the production of the Serra Norte mine area slightly decreased year-on-year during this period, it was in line with the development plan of the mine area.

2. Southeastern and Southern Systems: Overall stable production, with the Vargem Grande mine area showing strong performance. The Southeastern System is located in Minas Gerais State, divided into three major integrated production areas: Itabira, Minas Centrais, and Mariana. The Southern System is also located in the same state, composed of two major integrated mining areas: Paraopeba and Vargem Grande. These two systems are the main production areas for Vale's pellet products. In the second quarter, the total production of iron ore from the two systems was 41.06 million tons, an increase of 2.47 million tons year-on-year, an increase of 6.4%. The pellet production was 5.85 million tons, accounting for 65.7% of the total pellet production, almost unchanged from the 5.83 million tons in the second quarter of 2023.

Among them, the Southern System performed particularly well, setting a new high for the second quarter's production in the past five years. The iron ore production of the Southern System in the second quarter was 19.84 million tons, an increase of 3.05 million tons quarter-on-quarter, an increase of 18.2%. This is mainly due to the excellent operational performance of the Vargem Grande mine area in the second quarter, which produced 11.87 million tons of iron ore, achieving a year-on-year increase of 27.5%. In addition, the comprehensive facilities of the Paraopeba mine area have also been continuously maintained and upgraded during this period, contributing to the overall increase in production of the Southern System. During this period, the iron ore production of the Southeastern System slightly decreased to 21.23 million tons, a decrease of 560,000 tons year-on-year, a decrease of 2.6%. This is mainly because after the Brucutu plant was converted to wet processing last year, the share of high-quality ore production increased. In addition, some factories in the Itabira production area carried out equipment maintenance, which also affected the iron ore production to a certain extent, largely offsetting the purchase volume of third parties.

Part 03: The 2024 Annual Production Target Remains Unchanged, Expected to be Achieved at High Levels 🎯

By the end of the second quarter, Vale's overall production and sales continued the outstanding performance of the first quarter. The excellent operating performance of this quarter has strengthened the company's confidence in achieving the annual production target for iron ore at the upper limit of the guidance. Thanks to this, although Vale announced that the 2024 annual production target remains unchanged at 310-320 million tons, the total production of iron ore in the first half of the year was 151 million tons. According to the upper limit of the target, the current progress is 47.3%. Considering the seasonal growth space in the second half of the year, Vale's target setting is relatively conservative, and Mysteel estimates that its annual production will be completed at high levels and may exceed the upper limit of the target, maintaining above 320 million tons.

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