14/11/2008
SAO PAULO- World prices of minerals such as iron ore and nickel have started to show signs of stability after a recent slump, Brazil's mining giant Vale said on Friday, adding that it was unclear if this was sustainable.
Spot iron ore prices have dropped about 75 percent in the last six months as the global financial crisis hit the real economy, leading steelmakers and iron ore miners to cut output.
"It's too early to say about prices. We see good indicators," Vale's Financial Director Fabio Barbosa said. "We had an increase in iron ore spot prices and in some cases nickel has been volatile but sustained at a certain level."
China, which has been a major driver for the global iron ore demand growth, had cut imports of the mineral. But Barbosa said the company sees signs of reaction in Chinese demand.
"Things are moving slowly but the first impression, and this is just an impression, is that deterioration stopped," Barbosa told analysts at the London Stock Exchange, in a speech monitored by webcast.
Vale, the world's largest iron or miner, has cut its iron ore output by around 10 percent from November to support falling metals prices in the face of weakening demand and rising stocks.
The company also reduced the production of nickel, manganese, aluminum and other metals and announced a slower ramp up in Goro and Onca Puma nickel projects. Nickel prices have also fallen sharply in recent months.
Barbosa said Vale's iron ore shipments were unchanged until September and then the company started to have a "different market sense" in the first and second weeks of October.
"Today it is easy to say but we never expected to see such a quick adjustment in demand and on production of steel (in China)," he said. China, South Korea and Japan together consume nearly half of the world's steel production.
Considering the output reduction and the delay in projects, Barbosa said Vale's output in 2009 will likely be "slightly lower" than this year's.
He added the company will continue to support the current contract benchmark negotiations instead of the spot price system advocated by some of its rivals. (Reporting by Inae Riveras and Eric Onstad; editing by Jim Marshall)
Source: http://www.reuters.com/article/rbssSteel/idUSN1427804920081114
