Vale announces widespread decline in production and sales in Q1 2019

JP Casey 9 May 2019 (Last Updated May 9th, 2019 13:13)

Brazilian miner Vale has announced its production and sales figures for the first quarter of 2019, with both figures declining across its operations in the wake of the collapse of a Vale dam near the town of Brumadinho.

Vale announces widespread decline in production and sales in Q1 2019
A Vale building in São Paulo, Brazil. Credit: Felipe Mostarda.

Brazilian miner Vale has announced its production and sales figures for the first quarter of 2019, with both figures declining across its operations in the wake of the collapse of a Vale dam near the town of Brumadinho.

Coal production suffered the greatest decline from the final quarter of 2019, where the company showed strong performances, with a 28.8% drop from the end of 2018 to the beginning of 2019. This is a 9% decrease on figures from the first quarter of 2018. Manganese ore saw the largest decline between Q1 2018 and Q1 2019, with a fall in production of 15.9%.

Iron ore production saw the second-largest decrease in both categories, with a fall of 11.1% from Q1 2018 to Q1 2019, and a crash of 27.8% from the final quarter of 2018 to the first quarter of 2019. Vale’s sales of both manganese ore and iron ore fell by similarly large amounts, with a 31.2% decline in iron ore sales from Q4 2018 to Q1 2019 and a 43% decline in manganese ore sales over the period.

The struggles in iron ore hit particularly hard for Vale, which has been considered the world’s leading iron producer for some time. The company released a breakdown of changes in iron ore production in relation to the relative locations of its operations, categorising its iron projects into the northern, southern, south-eastern and midwestern systems.

The south-eastern systems include the Brucutu, Timbopeba and Alegria mines, which were all closed following the January disaster as officials completed investigations into the company’s mine sites in relation to new Brazilian mining safety regulations. Operations at the Brucutu mine in particular have been troubled, with Vale receiving two separate court orders permitting the resumption of operations, both of which have been overturned by separate rulings.

As a result, the company’s south-eastern systems saw the second largest decline in iron ore production from Q4 2018 to Q1 2019, with a fall of 26.2%, compared to 22.5% in the northern system and 10.4% in the midwestern system.

However, the southern system saw iron ore production collapse by 43.9% over this period, and production was 36.4% lower in the first quarter of 2019 than the first quarter of 2018, the most dramatic declines of any region and over either period.

Along with the Brumadinho dam disaster, Vale also blamed adverse weather conditions for the extent of the decline, saying that “heavy rains in São Luís do Maranhão in March and April affected shipments at the Ponta da Madeira port and the railway transportation at EFC, thus impacting the production volumes at the northern system.

“As a result of both events, Vale reaffirms its 2019 iron ore and pellets sales guidance of 307-332 million tonnes, as previously announced, and informs that its expected sales volume is currently between the bottom and the middle of the range.”

While production and sales of all commodities fell from Q4 2018 to Q1 2018, long-term copper production was a small consolation for Vale. The company’s copper production from the first quarter of 2018 to the first quarter of 2019 increased by 0.5%, the only positive change over any period of time and copper sales increased by 3.1% over this period.