The new chief executive of Vale, the world’s largest exporter of iron ore, Fabio Schwartsman, says the company needs to diversify, as prospects get more complex, writes Patrick Knight.
Comments by Schwartsman, until recently chief executive of the Klabin pulp and paper company, who has just taken over as chief executive of Vale, Brazil’s giant ore producer, illustrate very well many of the problems facing iron ore both worldwide as well as in Brazil.
The price of ore has fluctuated between a high of close to ZAR 1,299 per tonne, to a low of about ZAR 519 this year and the price is predicted to continue to be volatile for the forseeable future. This is largely because of the uncertainty as to what economic policies the Chinese government will adopt. Worries about the sustainability of the model which has served that country well for many years, have caused concerns to rise.
The fact that Vale is now almost exclusively dependent on its revenues from the sale of ore, rather than from a wide range of activities, as it was in the past, is a matter of great concern, says Schwartsman. In recent years, about half the ore exported by Vale, and more than that for some other the other miners in Brazil as well, has been destined for China. As output at the latest workings at Vale’s super-efficient and low-cost Carajas mine increases, together with improvements to railways and at ports allow Vale’s exports to grow, it is anticipated that the share of Vale’s ore going to China will increase as well.
During the last century, of course,Vale did not only produce iron ore, as well as some nickel and gold, it was a leading player in all aspects of Brazil’s aluminium industry. It used some of the profits of these to plant hundreds of thousands of hectares of mainly eucalyptus forest, mainly for use by the pulp and paper industry, as well as for the pig iron industry, and it owned shares in several pulp mills. It was also a leading producer of fertilizer. Vale owned and operated a large fleet of ships, ran not only the state-of-the-art railways linking its mines in Minas Gerais state as well as Carajas to ports which it owned and operated, it also bought shares in other railways when they were privatized.