VALE's Q2 Iron Ore Output Up 2% Y/Y, Copper and Nickel Lags

Vale S.A. VALE reported iron ore production of 80.6 million tons (Mt) for the second quarter of 2024, which was up 2% year over year, attributed to improved operating performance at the S11D and Vargem Grande.

During the quarter, the S11D mine delivered record production of 19.5 Mt, bolstered by ongoing asset reliability initiatives.

Pellet production declined 2.4% year over year to 8.9 Mt. This was attributed to lower pellet feed availability at the Vargem Grande plant and maintenance at the São Luis plant.

Iron ore fines sales improved 8.2% from the year-ago quarter to 68.5 Mt while pellet sales were up 0.6% to around 8.9 Mt. Total iron ore sales were up 7.3% to 79.8 Mt, reflecting higher shipments, as well as the sale of inventories from prior periods.

The average realized iron ore fines price was $98.2 per ton in the June-ended quarter, down 0.3% year over year and 2.5% sequentially, due to lower iron ore prices.

Copper Output Dips, Nickel Plunges

In the second quarter, Vale produced 78.6 kt of copper, which was 0.3% lower than the year-ago quarter. Improved productivity at Salobo's 1 & 2 plants, as well as Sossego, were offset by the bi-annual maintenance in Sudbury. 

Vale sold 76.1 kt of copper, which was up 3% from the year-ago quarter, reflecting sales from its inventory despite lower production. 

The average realized price for copper operations only (Salobo and Sossego) was $9,202 per ton, up 31% year over year and 19.7% on a sequential basis due to higher LME prices. The average realized copper price for all operations (including copper sales originating from nickel operations) was $9,187 per ton.

Production of nickel plunged 24% year over year to 27.9 kt in the April-June 2024 period. This reflects the impact of the planned maintenance strategy at the nickel processing plants. 

Nickel sales were recorded at 34.3 kt, down 15% from the year-ago comparable quarter's figure due to lower production figures. The average realized nickel price was $18,638 per ton, down 19% compared with $23,070 per ton in the year-ago quarter. This was in line with the decrease in LME nickel reference prices.

Guidance for 2024

The company's iron ore production guidance for 2024 is in the range of 310-320 Mt. Vale had produced 321 Mt of iron ore in 2023. Pellet production is projected to be between 38 Mt and 42 Mt, higher than the figure of 36.5 MT in 2023.

Vale expects to produce copper in the range of 320-355 kt. The company's copper output in 2023 was reported at 326.6 kt.

Vale expects nickel production to be between 160 kt and 175 kt. In 2023, the total production of nickel was recorded at 164.9 kt.

Peer Performances

Rio Tinto RIO reported a 2% decrease in its second-quarter (ended Jun 30, 2024) iron ore production to 79.5 MT (on a 100% basis) as ore depletion offset productivity gains. A train had derailed in mid-May at its Western Australia iron ore operations, which led to six days of lost rail capacity and full stockpiles at some mines, impacting production for the quarter. Copper production was 171 thousand tons, 18% higher than the year-ago quarter.

RIO's shipments for the quarter (on a 100% basis) were reported at 80.3 Mt, which were down 2% year over year. The company expects Pilbara iron ore shipments (100% basis) to be between 323 Mt and 338 Mt in 2024. The range indicates a year-over-year decline of 3% to growth of 2%.

BHP Group BHP announced that its iron ore production rose 6% year over year to 69.2 Mt in the fourth quarter of fiscal 2024 (ended Jun 30, 2024), aided by record production at Western Australia Iron Ore as a result of strong underlying performance at the mines and the benefits of the Port Debottlenecking Project 1. Copper output improved 6% year over year to 504.9 kt. 

BHP's iron ore production for fiscal 2024 was a record 260 Mt and copper production was 1,865 kt, the highest in 15 years.

Price Performance

Shares of Vale have lost 18.1% in a year, in line with the industry.

Image Source: Zacks Investment Research

Zacks Rank & A Stock to Consider

Vale currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the Basic Materials space is Carpenter Technology Corporation CRS, which currently sports a Zacks Rank #1 (Strong Buy).

The Zacks Consensus Estimate for Carpenter Technology's fiscal 2024 earnings indicates year-over-year growth of 281.6%. CRS beat the consensus estimate in each of the last four quarters, the average earnings surprise being 15.1%. The company's shares have soared 109% in the past year.

To read this article on Zacks.com click here.