China Iron Ore February 2013 Beijing, China Luiz Meriz Iron Ore Marketing Director

Transcription

1 China Iron Ore February 2013 Beijing, China Luiz Meriz Iron Ore Marketing Director

2 Disclaimer This presentation may include declarations about Vale's expectations regarding future events or results. All declarations based upon future expectations, rather than historical facts, are subject to various risks and uncertainties. Vale cannot guarantee that such declarations will prove to be correct. These risks and uncertainties include factors related to the following: (a) the countries where Vale operates, mainly Brazil and Canada; (b) the global economy; (c) capital markets; (d) the mining and metals businesses and their dependence upon global industrial production, which is cyclical by nature; and (e) the high degree of global competition in the markets in which Vale operates. To obtain further information on factors that may give rise to results different from those forecast by Vale, please consult the reports filed with the Brazilian Comissão de Valores Mobiliários (CVM), the French Autorité des Marchés Financiers (AMF), and with the U.S. Securities and Exchange Commission (SEC), including Vale s most recent Annual Report on Form 20F and its reports on Form 6K.

3 Colocar aqui o Macroeconomic outlook: confidence in market fundamentals divisor da seção, definido em 50pts.

4 Emerging markets tend to drive the recovery of global industrial production Industrial Production (%) Emerging Markets Developed Projections 3 Source: Bloomberg, Vale Average

5 Significant reduction of Euro break up risk 12 Sovereign debt 10 years (Yield in %) Itália Italy Espanha Spain Portugal Jul Sep Nov Jan-13 4 Source: Bloomberg

6 US industry is recovering US industrial production (Index, sa) Unemployment (%) Source: Federal Reserve Bank

7 Chinese industrial activity is gathering speed Industrial Production gathered speed in December, up 10.3% yoy, led by a rebound in retail sales. Purchasing Manager s Index is also rising and climbed above the 50 expansionary territory, suggesting a revival in manufacturing activities. CPI increased to 2.5% in Dec12, yet still within safe zone for further economic improvement. China industrial production and PMI China CPI (%) China CPI (%) Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-1 Source: CEIC/Haver Analytics

8 Colocar aqui o We believe that Chinese steel fundamentals remain sound divisor da seção, definido em 50pts.

9 Urbanization trend indicates further potential for Chinese steel consumption Urbanization Rate & CSC (1950 to 2012) Steel production per capita in most developed countries only peaked when urbanization rate was above 70%. China s urbanization rate was around 52% in Assuming China urbanizes at 1.8%* pa., another 10 years are needed to reach 70%, around CSC/Capita (kg) Steel consumption peak Japan South Korea Germany USA China India Brazil 0 0% 20% 40% 60% 80% 100% Urbanization Rate (%) *Source: WSA for steel production per capita and UN for historic and forecast urbanization rate.

10 Expected evolution of Chinese steel consumption We expect Chinese steel consumption growth rates to slow down in coming years, but remain positive over this decade. Relation between GDP per capita (PPP) and CSC per capita (1900 to 2011) Crude steel consumption per capita (Kg) Japan, 1973: 807Kg /capita Germany, 1969: 706Kg /capita USA, 1955: 660Kg /capita GDP per capita (US$, 2005, PPP adjusted) Japan South Korea Germany USA China India China Forecast High and low expected limits Source: IMF, WSA, Vale estimates

11 Chinese steel consumption should evolve following economic trends in the country Better balance between investment and consumption as well as development of in-land regions. 100% China steel consumption by sector (Shift from construction to machinery and consumer durables) China steel consumption by region (Shift from east to central and west regions) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Western China Current: 362Kg/hab Expected peak: > 450Kg in 2025 Central China Current: 428Kg/hab Expected peak: > 650Kg in 2020 Construction machinery automobiles shipbuilding appliances Others Eastern China Current: 660Kg/hab Expected peak: > 750Kg in 2015 Source: Vale estimates

12 Colocar aqui o Vale s investment initiatives divisor da seção, definido em 50pts.

13 Iron ore capacity expansion related projects amounting to more than US$ 3.6 billion in 2013 Projects approved by the Board of Directors 1 Volume Estimated Start up Capex ($ mln in 2013) Iron Ore Carajás Additional 40 Mtpy 40 Mpty 2H Iron Ore Logistics Iron Ore Iron Ore CLN 150 Mtpy (Northern System railway and port capacity, Pier IV construction) Carajás Serra Sul S11D (mine + processing plant) Carajás Serra Leste (new processing plant) EFC capacity to 150 Mtpy 1H13 to 2H Mtpy 2H Mtpy 1H Iron Ore Conceição Itabiritos 12 Mtpy 2H Iron Ore Vargem Grande Itabiritos 10 Mtpy 1H Iron Ore Conceição Itabiritos II 19 Mtpy 2H Iron Ore Cauê Itabiritos 24 Mpty 2H Iron Ore Logistics Teluk Rubiah (Distribution Center, Malaysia) 30 Mtpy 1H Pelletizing Plant Tubarão VIII 7.5 Mtpy 1H * As of Dec 3, 2012.

14 Vale s projects pipeline Northern System Carajás Additional 40 Description: Dry processing facility (new plant) close to the current Carajas beneficiation plant. Production capacity: 40 Mty. Production split: 100% sinter feed. Estimated CAPEX: USD 1.9 billion. Start-up: Expected quality: Fe: ~64.70% SiO2+Al2O3: ~4.10% P: ~ 0.039% 13

15 Carajás Additional 40 - pictures Additional 40Mt/y Conveyor belt assembling New Plant Classification building construction Loading bin assembling Crushing facility construction 14

16 Carajás S11D: the largest project on Vale s history and on iron ore s industry Nominal capacity: 90 Mtpy. Start-up: 2H16. Phisical progress¹: 37%. Total Capex: US$ 8.04 billion Equipment s Stockyards 2013 Capex: US$ 658 million. Stripping ratio: Mass recovery: 100%. Truckless mining, dry processing, no tailings dam, and 50% reduction on greehouse gases emissions. Low cost 4.2 billion metric tonnes of proven and probable 66.7% Fe. Processing polants 15 1 Em 30 de setembro de 2012.

17 Northern system current situation Iron ore production capacity of 110Mtpy PA EFC São Luís Ponta da Madeira Maritime Terminal Serra Norte Serra Leste MA Carajás Parauapebas TO 16 S11D PI

18 Carajás additional 40Mtpy and CLN 150Mtpy expansions Increasing nominal capacity from 110Mtpy to 150Mtpy Expansion of CLN to 150 Mtpy additional 40Mtpy capacity in Carajás northern range mines - duplication of 11 sections of the EFC Serra Norte Serra Leste PA EFC São Luís Ponta da Madeira Maritime Terminal Port investments: 2 car dumpers 2 New yards 2 Reclaimers 1 Stacker Pier IV South berth MA Carajás Parauapebas TO 17 S11D PI

19 S11D mine & related logistic expansion Increasing nominal capacity from 150Mtpy to 240Mtpy Expansion of CLN for S11D additional 90Mtpy capacity - new branch connecting the mine to EFC and duplication of 42 sections of the EFC Serra Norte Serra Leste PA EFC São Luís Ponta da Madeira Maritime Terminal Port investments: 2 car dumpers 4 New yards 2 Reclaimers 1 Stacker 2 stacker & reclaimer Pier IV South berth MA Carajás Parauapebas TO 18 S11D PI

20 Conceição Itabiritos Description: New beneficiation plant to process compact itabirites. The process flow includes 6 ball mills and flotation facility. Production capacity: 12 Mty. Production split: 100% high grade pellet feed. Estimated CAPEX: USD 1.17 billion. Start-up: Expected quality: Fe: ~67.70% SiO 2 +Al 2 O 3 : ~1.10% P: ~ 0.025% 19

21 Vargem Grande Itabiritos Description: New beneficiation plant to process itabirites, stockyard expansion and long distance conveyor belt. Production capacity: 10 Mty. Production split: 100% pellet feed. Estimated CAPEX: USD 1.65 billion. Start-up: Expected quality: Fe: ~67.80% SiO 2 +Al 2 O 3 : ~1.71% P: ~ 0.035% 20

22 Conceição Itabiritos II Description: Refurbishment of existing Conceição plant (new process flow) to process compact itabirites. Primary crushing construction Production capacity: 19.3 Mty. Production split: 32% sinter feed and 68% pellet feed. Estimated CAPEX: USD 1.19 billion. Start-up: Expected quality: Fe: ~68.10% SiO 2 +Al 2 O 3 : ~2.66% P: ~ 0.023% 21

23 Cauê Itabiritos Description: Refurbishment of existing Cauê plant (new process flow) to process compact itabirites. Production capacity: 24 Mty. Production split: 29% sinter feed and 71% pellet feed. Estimated CAPEX: USD 1.5 billion. Start-up: Expected quality: Fe: ~67.64% SiO 2 +Al 2 O 3 : ~2.30% P: ~ 0.017% 22

24 Iron ore expansion plan Iron ore production¹ (Mt) Operações Existing Projetos Projects Operations 23 ¹ S11D expectet to reach 90Mt only in 2018.

25 Focus on Quality Vale has the largest reserve base of the iron ore industry. Additional supply and quality improvement depend on delivery of new projects. After years of efforts, new environmental licenses have been granted, which should allow us to deliver greenfield projects and improve our iron ore quality from 2014 onwards. 68,0 Iron Content (%) Silica + Alumina Content (%) 8,0 66,0 6,0 4,0 64,0 2,0 62, ,

26 Tackling the logistic disadvantage CFR sales, Valemax, own fleet and distribution center are tools which allow supplying the ore in the right time to market, with required blending quality and with smaller stem size when necessary Economy of Scale and Lower Carbon Emissions Valemax DC Malaysia & FTS Time to Market, size of lots, blends FTS (Philippines) DC Malaysia Valemax

27 Valemax increases the efficiency of the trade route and the ports, and also increase safety and reduce carbon footprint Reduce carbon footprint Valemaxes are the most environmental friendly ships in the dry bulk market (-34% CO 2 emissions), and further implementations will decrease further our carbon footprint. Economy of scale Due to its size and efficiency the Valemax ensures that our ore is transported to our customers in a competitive manner, nullifying the geographical disadvantage Valemaxes are the best suitable vessels to transport iron ore Safety Hold geometry is more adequate, with 6 bilges per hold to reduce standing water facilitating unloading procedures; Reduced number of ships in port, lowers environmental risk. Increase export capacity Valemax arrival is designed to meet our production increase; Valemaxes maximize port efficiency and reduce queues; Continuous flow of iron ore to Asian market.

28 Valemax ports for fully loaded or lightered ships Up to date, Valemaxes have already achived the mark of 40 Mt delivered to steel mills across the globe. Rotterdam Taranto In China: Dalian Caofeidian, Qingdao DJK Majishan, Oita & Kimitsu Sohar Gwangyang PDM Tubarão Malaysia DC Subic bay FTS & JFE Mindanao Already loaded/discharged Potential

29 Floating Transhipment Station (FTS Ore Fabrica) Qingdao Subic Qingdao 4.2 days Operations started up in February Firstly to be stationed in Subic bay, Phillipines All issues cleared (legal, environmental, tax) Full support of authorities Subic

30 Update - Construction of DC Malaysia 29

31 Colocar aqui o Conclusion divisor da seção, definido em 50pts.

32 By adapting it s investment strategy to global mega trends, Vale aims at delivering long term value to our clients and shareholders Asia centric economy Global mega trends Natural resources scarcity Innovation Green solutions Vale s iron ore projects Vale believes in China and is committed at increasing its iron capacity. Development of S11D and other projetcs will leverage a high quality product portfolio in an environment of increasing natural resource scarcity; Implementing numerous green and innovative mining and logistics solutions with Valemax, Truckless mining, dry processing will increase safety, efficiency and reducing environmental impact of the whole industry; Developing a comprehensive logistic strategy with Valemax, DCs and FTS will allow us to reduce our competitive disadvantage, moving our mines closer to epicenter of global economic growth - Asia

33 Thank you!