Vale (NYSE: VALE), the world’s top iron ore producer, has once again lowered projected output for 2020 due to a mix of factors including heavy rain, unplanned outages at a major operation, regulatory delays linked to last year’s dam failure, and ongoing disruptions to logistics caused by the coronavirus.
Iron ore production in the first three months of the year hit 59.6 million tonnes, below the already revised forecast of 63 to 68 million tonnes, mostly due to unscheduled maintenance on the long-distance conveyor belt at its flagship S11D mine.
Sales volumes over the past three months were even weaker at 51.6 million tonnes, 33% lower than in the last quarter of 2019.
Prices for the steelmaking material climbed on the news. Fastmarkets’ index for iron ore 62% Fe fines was 1.5% higher on Monday at $87.45 per tonne after trading Friday at $86.17.
The weak start to the year means Vale now expects to produce between 310 million and 330 million tonnes of iron ore fines this year, down from the 340 million to 355 million it had forecast earlier.
The company, which is also the world’s top nickel miner, axed its 2020 production forecast for the metal to 180,000-195,000 tonnes from 200,000-210,000, excluding its unit in New Caledonia.
Nickel prices climbed to their highest in more than a month on the London Metal Exchange (LME) following the news, hitting $12,440 per tonne. Benchmark nickel was still trading 2.6% higher at $12,350 per tonne by 11:25 GMT.
“Vale’s cut to production has supported the [nickel] market, but mines closing production is not too new as we knew some mines would shut,” said Commerzbank analyst Daniel Briesemann.
“The negative impact of the virus is more severe for the demand side and the market could be well oversupplied this year.”
Vale also lowered its copper guidance from 400,000 tonnes to between 360,000 and 380,000 tonnes. It said it was withdrawing coal output numbers, adding it was unable to provide a new figure at the moment.
The company’s results come as main iron ore rival BHP (ASX, LON, NYSE: BHP) is expected to confirm on Tuesday that its flagship iron ore division remains on track to meet full-year export targets.