Vale cuts 2020 outlook for iron ore fines, pellets after Q1 guidance miss

London — Miner Vale cut guidance for iron ore fines and pellet sales in 2020, after a weak first quarter for operations and falling global pellet demand.

Vale's 2020 iron ore fines production guidance fell to 310 million-330 million mt, from 340 million-355 million mt, 8% lower based on the midpoint of the ranges, the company said in a report late Friday.

Vale cut iron ore pellet production guidance to 35 million-40 million mt, from 44 million mt.

In Q1, Vale produced and sold around 59 million mt of iron ore fines and pellets, of which 87% was classed as premium products.

Output at 59.6 million mt missed quarterly guidance of 63 million-68 million mt, as unscheduled maintenance, seasonal disruption, and operational constraints in northern and southeast Brazil areas hit performance.

Iron ore product sales for Q1 fell 13% from Q1 2019, and 34% from Q4 2019. Iron ore production fell 18% from Q1 2019, and 24% below Q4 2019.

Vale said pellet premiums fell in Q1, compared with Q4, while iron ore fines premiums rose in the same period.

Vale sold 7.3 million mt of pellets in Q1, down 41% from a year earlier, and produced 43% less pellets at 6.9 million mt.

Pellet operations in Brazil and Oman suffered from planned outages, unscheduled maintenance, limited pellet feed availability and weaker demand, Vale said.

The company's Vargem Grande pellet plant operations in Vale's Southern System unit may resume in Q3, with beneficiation of pellet feed and mining plan depending on government agency approvals.

Brucutu in Southeastern System is seeking to double processing plant output to 80% capacity, and staying at a 40% capacity may lead group iron ore output to come in at the low end of Vale's new estimate.

Alternative tailings disposal are being tested, as Bructu's main tailings dam was put out of use for the time being by a new safety classification system.