Brazilian mining company Vale do Rio Doce is going to invest heavily in increasing production over the next few years. The company announced, August 7, that it intends to expand iron ore production from the current 296 million tons this year to 422 million tons in 2012.
Iron pellet output should rise from 43 million tons to 71 million tons, nickel production should go from 248,000 tons to 507,000 tons and copper production, from 284,000 tons to 592,000 tons. Also to be expanded are the productions of alumina – from 4,300 tons to 8,200 tons – and coal – from 2,200 tons to 15,000 tons.
The company is going to invest US$ 59 billion over the next four years, expecting high demand for its products worldwide, especially in the East. According to the president and CEO at the company, Roger Agnelli, even though the business environment is affected by the United States crisis, markets that are growing now will continue to grow in the next few years.
"The Middle East, Asia, China, Brazil, all of these are very important markets for Vale," stated the executive. He claims that in these and other locations, such as certain African countries, a multitude of people are entering and will enter the consumer market in the coming years.
Figures presented by Agnelli indicate that 1.2 billion people will become part of the consumer market in the next ten years, demanding investment of US$ 5 trillion in infrastructure.
"Consumption of iron ore, copper and energy of all types should rise, and there is going to be a greater demand for food. Therefore, more fertilizers are going to be needed for producing foodstuffs," claims the president at Vale. According to him, fertilizers are going to help increase agricultural productivity.
So much so that Vale is investing in the area of phosphates and potassium, which are inputs for fertilizer manufacturing. Last year, the company purchased a phosphate mine in Peru, and now it is researching possibilities in the area in Mozambique, has projects underway in the Brazilian state of Sergipe and research in Argentina and Angola.
"We are focused on growing in order to cater to that demand," said the company's president. Agnelli also called attention to steel manufacturing, which uses iron ore as a raw material, and is a sector that is usually stuck in terms of growth.
"Brazil has grown, and now there is a shortage of steel," he said. He asserted that there are projects for new steel plants in Brazil, the Middle East, Asia and Africa. When questioned about whether expansion should slow down in 2009, Agnelli stated that even if Brazil and China, for instance, post lower growth rates, there will be significant expansion anyway.
Agnelli asserted that it is possible to draw a line separating West and East, and that the highest growth rates in the next few years should come from the East. "The East is doing very well. Even if China grows at a lower rate, still it will post strong growth. The Middle East has trillions and trillions of dollars in the bank. They want to generate employment, to ensure sustainable growth for the next generations," he told the journalists. Vale owns operations in Oman, an Arab country located in the Middle East.
Vale do Rio Doce posted positive financial results in the second quarter this year, according to figures presented by the company. Shipments of iron ore and pellets broke a record, with 78.6 million metric tons and growth of 18.9% over the same period of 2007.
Gross revenues grew at 22.5%, totaling US$ 10.9 billion, and net earnigns totaled US$ 5 billion, up 22.3%. The earnings before interest, taxes, depreciation and amortization (Ebitda) margin stood at 49.4%. The figures refer to the company's USGAAP (Generally Accepted Accounting Principles in the US) results.