Postcards from Brazil

We recently visited a number of iron ore producers, steel makers and metal traders in South America to gain a first-hand account of the impact that ongoing volatility is having on this significant portion of the supply chain. Chief amongst these was a meeting with Vale, the world's largest iron ore miner, who remains focussed on reducing costs and implementing strategies to be more competitive in the marketing of their ores to key Asian clients. We met Vale's director of planning in Belo Horizonte. He spoke at length about Vale's focus on reducing costs, a similar tone to what we are seeing from the Pilbara miners. It's yielding results too with Vale confident it will get costs down to ~US$40/t (delivered into China) in the June quarter, down 50% versus late 2014. Vale acknowledged that iron ore prices are hard to predict, and accordingly is preparing to operate even under the assumption of a US$45/t iron ore price, although critically for internal planning Vale is using sensitivity scenarios from US$55-75/t. Read more on the Morgans blog: (VIEW LINK)