The world’s largest iron ore producer, Brazil’s Vale posted a Q3 net loss due to a sharp depreciation of the Brazilian real and low iron ore prices.The miner announced a net loss of $1.44 billion in the quarter amid the lowest iron ore prices since 2010. The Rio de Janeiro-based company said net sales fell 27% to $9.1 billion in the quarter, representing a much worse forecast than analysts anticipated.
Commodity slumpIron ore prices dropped to below $80 in the Chinese market in mid-October hitting $79.80 on 24 October. The world’s largest producer of iron ore mined a record amount of the steel-making ingredient during the quarter, but Vale’s slight rise in production was not enough to offset the plunge in price. The rise was also below rivals Rio and BHP who have successfully increased production and cut costs in recent years.
‘Killing the supercycle’Glencore’s Ivan Glasenberg recently blamed the commodity glut on Rio Tinto and BHP, arguing their strategy is completely wrong.
Glasenberg said his two biggest competitors were fuelling a 25% increase in output that was ‘killing the supercycle’. While Vale produced a record amount of iron ore in the period, the turmoil in currency and commodity markets overshadowed any production gains.
“Because the functional currency of Vale is the Brazilian real, every time our total debt when expressed in the functional currency increases in value, we record a loss,” CFO Luciano Siani said in a video posted on the company’s website. “We acknowledge the challenging times.”