Vale’s Q2 2016 Production Review: Decline In Iron Ore Output As Production Cuts Take Effect

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Vale reported its production figures for Q2 2016 yesterday, with a decline in iron ore production the most striking takeaway from the report. After several successive quarters of reporting year-over-year increases in iron ore production as the company ramped up its iron ore output, production cuts from some of Vale’s higher cost iron ore mining operations instituted in the second half of last year have taken effect with the company reporting a 3% year-over-year decline in its Q2 iron ore production. [1] Vale had decided to cut around 25 million tons per year worth of lower margin iron ore production last year in response to plummeting iron ore prices, amid a global supply glut. [2] Whereas iron ore prices still remain subdued, production cuts from lower margin producers have eased the oversupply situation, arresting the decline in iron ore prices. Apart from the decline in iron ore production, Vale’s coal production stood 25% lower year-over-year as a result of geological instability issues at the Carborough Downs mine. Nickel production stood 17% higher year-over-year as production recovered from temporary outages last year, whereas copper production stood 2% higher year-over-year. Here is a summary of Vale’s Q2 production.

Vale Q2 2016 Production Review

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Vale
Notes:
  1. Vale’s Q2 2016 Production Report, SEC []
  2. Vale Rallies Most in Month Amid Iron-Ore Supply Cut Plan, Vale News Release []