The global financial crisis is prompting Brazilian mining giant Vale (NYSE: RIO) to slash output at numerous operations around the world, the company said.
In terms of iron ore, Vale will stop producing 30Mt of its current 300Mt/y domestic output. Cuts are to happen at three mines located in Minas Gerais state.
The company has also stopped production at two pellet plants in Brazil as of November 1. Furthermore, Brazilian activity of manganese and ferroalloy will be interrupted during December and January. The stoppage required that the miner give 20-day forced vacations to numerous company employees.
"It's a temporary adjustment we had to make," company CEO Roger Agnelli said at a company event on October 31 in Rio de Janeiro.
"We are halting production in some old deposits with lower quality iron ore. As for now, we will stop production but leave inventories inside the mines," he added.
Agnelli said steelmakers around the world are cutting down on production and therefore it does not make much sense to produce in mines with elevated costs.
"Steel production around the world is diminishing brutally," said the CEO. "Some steelmakers will be reducing production by 40% in coming months. "The entire chain is being negatively affected due to the absence of credit."
The company is also reducing activity at the Valesul Aluminio plant in Rio de Janeiro by turning off two furnaces and cutting production by 40% to 95,000t/y, the cause being high electricity costs.
The Vale CEO said the international nickel market is going through a "clearance" period as prices have been plummeting.
"We are seeing a sale of nickel right now in international markets," he said, specifying that traders bought excessive amounts of ores and now are selling at any price because there is no cash flow.
Last week Vale announced that nickel production in Indonesia and Dalian, China will drop by 20% and 35% respectively.
Agnelli said Vale is the Brazilian company mostly exposed to global markets because of all of its international customers.
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