Vale says to cut iron ore output 10%

Brazilian mining giant Cia Vale do Rio Doce (Vale) said Friday it would cut iron ore output by 10% from November as it braces for a global economic slowdown caused by the credit crisis.

Vale, the world`s largest producer of iron ore, said a 20% reduction in world steel industry output was having a direct impact on demand for ore.

"Keeping in view that the sole use for iron ore is for the making of steel, its demand has suffered directly and immediately the effects of the retraction in steel production," Vale said in a statement. The reduction in output amounts to 30Mt/y.

Last year, Vale produced 296Mt of iron ore, accounting for about 55% of its total revenues. The company said there was not sufficient space to simply store the mined ore as stocks of the size of tens of millions of tonnes. "The new global scenario demands, therefore, that Vale adjust its production programs in various countries, that will imply a reduction in the levels of output practiced up through September," it said.

The company said as of November 1 it will be suspending activities at some mines that produce ore of lower quality in the southern system of mines in the state of Minas Gerais. It said it will be implementing mandatory paid leave for workers at the affected mines. Vale added that the contraction in global industrial output has considerably affected the demand for base metals such as nickel and aluminium, which is resulting in a "significant accumulation of stocks."

The company`s manganese and ferroalloy production will also be shutdown this December and in January.

The Dunkerque plant of ferroalloy in France will remain closed until April. And the company`s plant in Mo I Rana, Norway, will remain under maintenance until June 2009. Owing to these shutdowns, Vale will reduce its manganese output by 600,000t and ferroalloy by 90,000t in the first half of 2009.

The company reiterated that it would be cutting its fuel oil-fired thermoelectric generation operations that will reduce its Indonesian nickel output by about 20%, or by 17,000t. Its nickel processing operations in Dalina, China will run at only 35% of their 60,000t/y capacity.

Vale will be also cutting its aluminium output at its Valesul Aluminio plant in Rio de Janeiro to 40% of its 95,000t capacity due to the high cost of energy at the unit. – Mining Journal

Global demand concerns drag copper 9 pct lower

Copper pulled industrial metals deep into negative territory on Friday, losing more than 9 percent as concerns over global demand triggered a sell-off across commodities. By 1031 GMT, copper for three month delivery on the London Metal Exchange fell to $3,845 a tonne from $4,210 at the close on Thursday and compared with a session low at $3,832.

Prices of the metal used in power and construction have fallen more than 50 percent since a record high of $8,940 in July.

Analysts said fears over global demand in the face of a worldwide economic downturn are to blame for the slump in prices.

"(Base metals are) not looking too clever," said Dan Smith, a metals analyst at Standard Chartered. "We are going to see prices remaining under pressure for the time being ... it's a sell-off across all the base metals in response to worries about the demand outlook."

"This tone is going to be with us for a while because people are waiting to get some clarity on the underlying picture. Certainly demand is getting softer," Smith said.

In industry news, Chile's Codelco, the world's largest copper producer, said its copper output fell 8.2 percent in the first nine months of the year, citing a strike by subcontract workers and falling ore grades.

Aluminium hit $1,997 a tonne, but was last at $2,000 from $2,065. Adding to the gloom, LME aluminium stocks jumped 1,150 tonnes to 1.5 million tonnes -- a reminder of the metal's weakened state of demand -- while copper stocks rose 6,775 tonnes to 230,650 tonnes.

"We are not out of the woods in terms of metals prices and economic recovery," said Fairfax analysts in a note. "Chinese demand remains a marked unknown and could make the difference between small and larger LME stock levels." Nickel was at $11,300 a tonne from $11,900 at the close on Thursday, lead was down 4.3 percent at $1,454 from $1,520 and zinc at $1,125 from $1,160. Tin fell 4.8 percent to $13,900 a tonne from $14,600.

Producers in the last few months have started to cut back production across metals as falling prices put profit margins under pressure.

Macquarie Bank analysts said in a note: "Although output cuts and project delays have been significant in recent months, the shorter term bearish demand outlook means that base metals need to remain at or below current price levels for a sustained period until we see sufficient production cuts as to tighten up the metals markets by say, the end of 2010."

Metal Prices at 1038 GMT Metal Last Change Pct Move End 2007 Ytd Pct

move LME Cu 3850.00 -360.00 -8.55 6670.00 -42.28 SHFE Cu* 31400.00 -1700.00 -5.14 56880.00 -44.80 LME Alum 1999.00 -66.00 -3.20 2403.00 -16.81 SHFE Alu* 13905.00 -550.00 -3.80 18180.00 -23.51 COMEX Cu** 188.85 0.00 +0.00 303.05 -37.68 LME Zinc 1119.00 -41.00 -3.53 2370.00 -52.78 SHFE Zinc* 9095.00 -420.00 -4.41 18950.00 -52.01 LME Nick 11150.00 -750.00 -6.30 26350.00 -57.69 LME Lead 1452.00 -68.00 -4.47 2550.00 -43.06 LME Tin 13750.00 -1475.00 -9.69 16400.00 -16.16 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 – Forbes