Iron ore price surges on Vale’s 2021 production outlook

Vale is still looking to return to a capacity of 400 million tonnes, which would see it regain the title of world’s biggest producer that it lost to Rio Tinto in the wake of the Brumadinho dam disaster two years ago.

But the production recovery is taking a little longer than thought as Vale navigates legal and pandemic obstacles. That helped fuel last year’s price rally that pushed up earnings.

The company posted its iron ore fines production down 0.5% on year to around 300.4 million tonnes for 2020, below its original production guidance at 310-330 million tonnes.

The Brazilian miner expects to achieve 350 million tonnes capacity by the end of 2021, with production guidance of 335 million tonnes.

“They are also behind schedule in getting safety approvals for dams following the disaster,” ANZ senior commodity strategist Daniel Hynes told Reuters.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China (CFR Qingdao) were changing hands for $158.03 a tonne, up 3.5% from yesterday’s trade.

Iron ore on China’s Dalian Commodity Exchange ended daytime trading up 5.3% at 991 yuan ($153.41) a tonne, after two days of losses.

A report that China’s central bank will keep liquidity reasonably ample to support economic recovery also buoyed sentiment.

Iron ore reached its highest level since September 2011 in mid-January, but has since declined 9%.

Credit Suisse, in a note quoted by Barron’s, lifted its forecast for iron ore during the first half of the year to $170 a tonne, from a lowly $110 before and also adjusted upwards its expectations for the next three years.

Morgan Stanley this week outlined the “plausible scenario” of $165-plus over the next three years, according to a Bloomberg report.

That’s in contrast to Australia & New Zealand Banking Group, which predicted a fall back to the $100 a tonne level by the end of the year.