China's weak steel market affects the world

The world’s largest iron ore producer, Brazil’s Vale, issued an announcement on Thursday that, as of the end of December of last year, its fourth-quarter results turned from profit to loss, resulting in a net loss of US$2.65 billion, affected by large write-downs (devaluation preparations). In the same period the previous year was a profit of US$4.67 billion. In the fourth quarter, Vale slashed $6.55 billion on underperforming mines, which was more than doubled as expected. Due to asset writedowns, this became the company’s first quarterly loss since the third quarter of 2002.

In addition, the reporter also noted that due to the lower prices of iron ore and other products, in the first decline in performance, Vale began using large ore sand transporters to increase sales at the end of last year, making up for longer shipping times and The inferiority of the ore itself is slightly lower.

The First Quarterly Losses and Larger Than Expected The profits of China's steel industry have been squeezed for a long time. Loss-making companies abound. Faced with the downturn of China’s largest buyer, the three major mines finally delivered an unsatisfactory result in 2012. The transcripts, such as losses from Vale, are an example.

According to data released by Vale, the company’s net profit for 2012 was US$4.86 billion, a sharp drop of 74% from 2011, the worst performance since 2004. Vale said that last year's profits were not satisfactory, mainly due to the fourth quarter. As the price of iron ore and other products was lower than the same period of the previous year, Vale's revenue in the fourth quarter of last year fell by 19% year-on-year to US$12 billion. What is even more surprising is that in the fourth quarter of last year, the company’s net loss was 2.65 billion U.S. dollars, which was the first quarterly loss in more than a decade, and it was also the largest quarterly loss in the history of Vale.

In response, Vale pointed out that book loss is the main reason for the decline in net profit. Vale, CEO of Vale, said: “Last year has brought great challenges to our company.” He explained that there were a series of derogations and non-recurring expenses that dragged Vale’s performance, including a $4.2 billion reduction in nickel and aluminum assets. Remember. The company also counted $232 million to settle a tax dispute with Switzerland, and $254 million was used to pay taxes on the state of Minas Gerais, Brazil.

“Loss of Vale also shows from the side that China's steel market is down to a certain extent.” Analysts in the industry analyzed the reporter. Last year, due to the excessive precipitation in the mining area and the decrease in purchase demand from China, Vale’s annual iron ore The output was 319.9 million tons, a year-on-year decrease. During the same period, the average international iron ore price was US$130 per ton, which was lower than the US$143 in 2011. “The decline in iron ore production and the fall in international iron ore prices have contributed to the overall loss.”

It is worth mentioning that Vale's stock has fallen by 13% since the end of 2012, partly because investors are ready for the company to report its first quarterly loss since 2002.

Looking at large-scale sand carriers to improve performance, the reporter noticed that while the performance was sluggish, the output of the three major mines in 2012 continued to grow steadily. Looking through the data, Rio Tinto’s 2012 production was 253 million tons, a 4% increase over the previous year; BHP Billiton production was 161 million tons, an increase of 7.6%; Brazil’s Vale production was 320 million tons, a slight decrease; in addition, FMG’s increase was more pronounced. The output reached 68 million tons, about 14 million tons more than the previous year.

The declining demand for steel in the world has led to a decline in demand for iron ore, but China's iron ore demand has not seen a “heat reduction” trend. Behind the high output, or China's dependence on imported mines.

Data show that in 2012, China’s total iron ore imports were 743 million tons, an increase of 57 million tons, an increase of 8% over 2011. Among them, the amount of ore imported from Australia was 35.146 million tons, Brazil was 16.422 million tons, and South Africa was 40.63 million tons. According to Li Xinchuang, deputy secretary-general of the China Iron and Steel Association, China’s steel demand this year is expected to increase by 4.1% to 666 million tons, and China’s demand for iron ore will increase by 5.7% this year to 1.11 billion tons.

In the first declining performance, Vale began using large ore-sanding sand carriers to increase sales at the end of last year to compensate for the slightly longer shipping time and the lower quality of the ore itself. The reporter noted that the large-scale ore vessels of the Vale have already stopped at ports such as the Philippines, the Port of Vilanueva, the Tubarão Port of Brazil and the Port of Madeira, and the Port of Taranto of Italy.

Analysts said, "The new cargo ship has a carrying capacity of about 400,000 tons, and its transport of 1 ton of iron ore requires 35% less fuel than conventional ships, and carbon dioxide emissions can be reduced by 35%." He said that he welcomes any measures that will help reduce the cost of iron ore and welcomes Vale's introduction of its large ore sand transporter into China.

Experts believe that Vale is committed to the expansion of iron ore and the promotion of large-scale transport vessels. The main objective should be to increase the sales of iron ore in the international market and ensure the continued profitability of its iron ore business, and China’s fine mineral resources are few and cannot fully meet its requirements. In light of the need for economic development, the Chinese market is crucial for its market share. Therefore, it is of strategic importance that large-scale ore carriers can fully obtain Chinese agreement to stop at Chinese ports for their subsequent profitability.