Vale SA plans to offer more lower-quality iron ore to meet the needs of a struggling steel industry, as it seeks to expand beyond its traditional role as a supplier of high-quality materials to the steel industry.
New CEO Gustavo Pimenta laid out the strategy at an investor event in New York, saying the Rio de Janeiro-based company needed to adapt to current market conditions to become a more flexible supplier.
“Although Vale is the leader in high-quality iron ore, we have a lot of flexibility in our operations. We need to succeed even when margins are nonexistent and when customers demand cheaper products,” Pimenta told reporters.
Pimenta’s strategy is a different path from his predecessor Eduardo Bartolomeu, who focused on making the company the primary supplier of the high-quality iron ore customers need to produce steel with lower emissions. Vale is the world’s second-largest supplier of iron ore after Rio Tinto.
Pimenta noted that steel mills are currently facing significant challenges that will make the transition to decarbonization longer than expected. That means customers are not always willing to pay the premium required for Vale’s high-quality iron ore.
Since taking over in October, Pimenta has assured investors that he is focused on restoring competitiveness and lowering Vale’s costs. The company plans to keep iron ore production largely unchanged next year, amid market concerns about oversupply that are putting pressure on prices of the key raw material for steelmaking. The company has also cut its long-term forecasts for copper and nickel.
“I think this is a more realistic plan,” Pimenta said. “We want to make sure that this new cycle starts off right and that we deliver on everything we offer to the market during my administration.”
