Iron Ore Prices Should be Higher, Vale CEO Says

Now, first of all, how are you expecting iron ore demand to to actually perform into 2027?

Look, the reality is that in China, the demand continues to be solid. China is the largest market, they produce more than 60% of the crude steel production globally. So it continues to be solid there. I think the bright spot is ex-China. So you're seeing a lot of growth in, I was recently in Vietnam, in India. So you're seeing a lot of growth in Southeast Asia, but also in India, which is balancing a little bit the impact from this slowdown in China, which continues to be an important source of demand for us. They should be producing more than a million tons this year still, a billion tons this year still. So, we see the market yet balanced this year and for next year as well.

So there's not like a critically over supplied market because I know a couple of projects including Simando, you know, is is ramping up.

Yeah. So, so what we are seeing in this space is a phenomenon of depletion of about 60 to 80 million tons a year, also degrading the quality of the ore that is coming out has lower grades. So this is actually offsetting some of the impact from the new projects that are coming online.

What does that mean for price?

So prices should, um, you know, our view is that prices uh should be today a little higher, not because of supply and demand, but because of the impact of freight rates. So fuel prices have been higher impacting maturely the marginal producers. Uh we believe today there's about 10% of the seaboard market that it's actually losing money. So producers that are on the marginal uh point of the curve that are should that should be making not making money given where the prices are. So there has to be in our perspective some rebalance going forward as a result of that.

But do you see cost staying high in that space? I know you've had

We believe, we believe energy prices are likely to stay a little higher. Probably not as high as they are today, but I think the phenomenon of having higher energy prices impacting particularly freight rate is is here to stay a little longer.

Talk me a little bit about copper. So a lot of the copper bulls basically believe that, you know, mine supply can't keep up pace with the longer-term demand.

Yeah, the issue I mean, copper we don't have an issue of demand. The issue is supply, right? So it's a great position to be as a CEO. Um and Valley has a great story. Uh we are, we probably have the highest or the fastest growth portfolio of copper in this space. Uh we are doing about 380 kilo tons and we are planning to double that. uh especially in Brazil with low capital intensity. So very attractive projects. So we are very excited about the prospects of it. To give you a sense of it, we think uh and we plan that within the next 10 years, the copper space and the VBM, we call Valley-based metals should be about 40% of our annual contribution. visa-vis 30% today, in the past was 15%. So it's growing gradually as a result of this growing demand.

But but so how tight do you expect actually the market to become?

We we expect to continue to be tight. It's

Tighter than now?

Tighter than now. It's harder to bring projects online. It's taking longer, it's more expensive. uh, it's hard to find new deposits. So we uh continue to believe supply is going to be under pressure.

I know Valley has carved out, you know, a lot of the base medals. I mean, are you going for a full separation?

So, it is uh an autonomous operation. So the business we carved out, so it has uh an independent management team. Uh they've been doing very well operationally and also in terms of accelerating the growth plan. It continues to be a fundamental part of Valey's story. So Valey wants to continue to be diversified. Iron ore is certainly our main product, but we also see a lot of growth opportunities and we want to see copper being a bigger share of the Valley story.

But everyone's thinking, so is it a first step to something much bigger? Just like a split off.

No, we're not seeing this at this point. I think the value for us and for our shareholders is to make this a bigger part of our story. So we want to make sure we continue to invest, we continue to grow. To my earlier point, we think copper can be 40% of our business together with Nico. Nico is also an important part of our story. So we see this as a fundamental part of the overall story for Valey.

We've been covering of course the Brazil elections very closely. It's also captured the imagination of a lot of investors given the the tight race. The the second round is on October 25th. What does it mean for your industry depending on who wins?

Look, I think it's it's a positive momentum for any president because Brazil sits in a very unique position by having an enormous endowment of critical minerals including high grade iron, right? And I think uh uh um independent of who is the next president, this is going to be a fundamental agenda for them. Brazil can be the supplier of choice for the US, for Europe, for China. So we sit in a very unique position and this can have an enormous benefit for the country in terms of the GDP growth, employment, income. So I'm very excited about the prospects that Brazil has in the energy transition.

But you're still very dependent, of course, on, you know, government regulation, on government awards for some of the projects. So, do you see a Flavio Bolsonaro government administration a lot less involved?

Look, I I I I see both supporting tremendously uh the sector, right? If you look at the overall mining contribution for the Brazilian GDP is about 4%. But if you take uh Canada, if you take um Australia, Chile, it's more than 10%. So there's an enormous opportunity and I think any government would like to tap into that and support the industry.

So there's there's not one that's better for business. And we also know that Flavio Bolsonaro is much closer to the US. So could that potentially be an advantage?

Look, I think for mining particularly, both are supportive based on everything we've discussed with with them. I think both of them would support and see this as a very strategic asset for the country going forward.

What's your biggest hope for for, you know, growth for Valle after the elections?

So what we need to do is to make sure we unlock that potential. So accelerating for example the licensing process in Brazil, it is a fundamental part because in terms of speed, we want to continue to be responsible miners. This is super important, but we want to make sure given all of the demand and the supplied challenges that I talked about, if you're able to accelerate the licensing process for as one of the examples, I think it's going to be a tremendous opportunity.

And have you heard from both sides that actually they're they're looking that this is, you know, they could be looking but if it's not their priority is, it could take a long time.

Yeah, I can see this being a priority for both candidates because they see the merits of it. Uh and the potential contribution for the overall Brazilian economy. So I I I'm I'm very optimistic about it.

How much do you want to grow Valley in the next couple of years?

So, uh in we want to uh continue to grow the company, especially with improving the mix of the we provide for higher quality. So we are doing about 336 million tons this year. We want to get to 360 million tons. We are the largest producer and we continue to believe in the medium to long-term given urbanization, decarbonization, a series of macro trends that we are seeing population growth. and we want to double the size of the copper business. So, um this is something we feel very much under our control and we are very excited about it.

And and when are you expecting cost to come down on freight what we talked about?

It came down recently a little bit because of but not enough. Uh so I see more opportunity especially when uh the marginal producers start to come off the market. I mentioned about 10% of the sea born is actually losing money, which is about 160 million tons. Our assessment is that today, 15 million tons went off the market because of those higher prices. So I can see a lot of marginal producers coming out of the market uh in the next couple of months, which should then rebalance the market for