"Brazil's Vale SA , the world's second-largest mining company, reported on Wednesday that its third-quarter net income more than doubled from a year earlier, beating analysts' expectations as iron ore prices and sales volumes rose".
"Net income for the three months ended September 30 soared 114 percent to $3.50 billion from $1.64 billion in the same period a year earlier, the company said. The result was 6 percent higher than the $3.3 billion average profit estimate of seven analysts surveyed by Reuters.
Iron ore prices averaged about a fifth higher in the third quarter of this year than in the same quarter of 2012, according to Thomson Reuters.
Net sales, or total sales minus sales taxes, rose 11 percent from a year earlier to $12.7 billion, beating the average analyst estimate of $12.5 billion. The volume of iron ore sales rose 11 percent to 73.4 million tonnes.
"We expected strong volumes, given the robust Brazilian iron ore export figures for July-September, but shipments still exceeded our expectations," mining analysts said.
"Vale's results were largely a reflection of iron ore prices that have remained 'higher for longer' in the face of widespread oversupply concerns," they added.
"The result comes a year after Vale moved to sharply cut costs and refocus expansion on its main iron-ore business. The spending diet came in the face of flagging demand and plunging prices in China for the raw material, the main ingredient in steel. China was responsible for 50.2 percent of Vale iron-ore sales in the period".
"While iron ore prices have recovered from the three-year lows of August 2012, executives of Vale and its main rivals, Australia's BHP Billiton Ltd and Rio Tinto Ltd , have said that a decade-long, China-led commodities boom is likely over. Resulting lower growth expectations prompted them to rein in investment and prospecting budgets.
The effort led to the mothballing or cancelling of new projects, the closing of money-losing mines and sale of assets or stakes in existing businesses. Investment in the first nine months of 2013 was $11 billion, 9.8 percent less than in the same period of 2012".
China's strong housing market, though, is keeping demand for steel and iron ore strong, Vale said in the statement. It will keep it strong in the near term as steelmakers and distributors have cut their stocks in the face of China's otherwise slowing economy.
"The Chinese economy should grow more moderately than it did in the third quarter, but despite this we expect the price of iron ore to remain stable," Vale said. It added that iron ore should average about $130 a tonne in the coming months".
Source: Reuters
