"Hemispherical" cannot be achieved, CEO of Vale: Leaving China, Vale | China

18000 kilometers.

This is the approximate distance from Beijing, the capital of China, to Rio de Janeiro, the headquarters of Brazilian mining giant Vale. Brazil is known as the "farthest country from China". If you take a plane, go through a series of processes such as connecting flights, and the fastest travel time from Beijing to Rio is nearly 26 hours.

How to shorten the physically farthest distance? This can be said to be a major key issue that Vale has been trying its best to solve since entering China 50 years ago.

In 1973, Vale exported its first shipment of iron ore to China, one year before Brazil and China officially established diplomatic relations. Vale CEO Bernardo recently talked about the story of Vale and China at a media conference celebrating Vale's 50th anniversary with China.

Bai Anduo frankly stated that the prosperity of the world requires China. Without China, not to mention globalization, "hemispherization" cannot be achieved.

Breaking geographical barriers

At present, the supply sources of imported iron ore in China are mainly concentrated in the "four major mines" of Australia and Brazil. But the sea distance from Brazil to China is three times that of Australia to China, and the distance greatly increases transportation costs.

Bai Anduo believes that there are several important milestones in the development of Vale in China, most of which are related to its efforts to break geographical barriers.

In 2011, the 400000 ton ultra large ore carrier Valemax was put into operation. The deadweight tonnage of Valemax is almost twice that of a cape type ship. Because we are far away from China, Valemax is an important milestone in bringing us closer to China.

Secondly, in 2015, Vale began cooperating with Chinese ports to carry out mixed mining operations in Chinese ports. It is understood that the iron ore in the northern mining area of the Vale in Brazil has high grade and low silicon content, while the southern mining area is the opposite, and the two mining areas are far apart. After the mixed mining operation is carried out, Vale can mix and match the north-south mines in Chinese ports. This not only saves production costs, but also brings sales to Chinese ports, shortening the distance between mines and end users such as steel mills.

"All the actions we have taken are aimed at supplying iron ore to the Chinese market," said Bai Anduo. It was precisely due to the presence of Chinese demand that the company began construction of the largest project in mining industry history, the S11D project, in 2013. The project was put into operation from 2016 to 2017, with a total investment of nearly 15 billion US dollars.

It is understood that China has been the largest market for Vale since 2006 and has been a sales destination for over 50% of Vale's iron ore products since 2014. As of now, Vale has supplied nearly 3 billion tons of iron ore products to China.

Leaving China,

Even hemispherization cannot be achieved

Regarding China's role in the world supply chain, Bernardo said that the prosperity of the world requires China. Without China, not to mention globalization, "hemispherization" cannot be achieved.

He pointed out that China has taken a series of practical actions to effectively maintain the stability and smoothness of the global industrial and supply chains.

Firstly, China has provided a sound infrastructure and market environment, attracting a large number of foreign-funded enterprises to enter the Chinese market.

Secondly, China actively promotes regional economic cooperation, continuously improves industrial chain integration and supply chain linkage with neighboring countries and other countries around the world, promotes the participation of multinational corporations in a wider range of industrial chains, and shortens the distance between multinational corporations and global partners.

Finally, China actively participates in global economic governance, adheres to multilateralism, and is committed to minimizing the interference of non economic factors on industrial and supply chains.

Decarbonization is an opportunity

China has announced the dual carbon target of "3060" and launched a series of carbon reduction and decarbonization actions. Will this reduce the demand for steel and iron ore?

Contrary to traditional beliefs, Bai Anduo sees decarbonization as an opportunity. "We believe that decarbonization can bring two demands - the demand for high-quality iron ore and the demand for metal furnace materials."

Decarbonization first requires high-quality iron ore, according to Bai Anduo. Vale is positioned as a company that provides iron solutions. Whether improving the production efficiency of blast furnaces or switching to electric arc furnaces, various technical solutions cannot do without high-quality iron ore. "Of course, there may be differences in market demand, and all of our strategies are readjusted to serve the market, in order to accurately meet the different needs of the steel market for iron content."

Vale announced in May this year that it has successfully tested an iron ore briquette suitable for direct reduction production routes, which can be used to produce hot pressed iron blocks. Compared with the blast furnace converter long process route, using natural gas to produce hot pressed iron blocks can significantly reduce carbon emissions in the steel production chain.

Bai Anduo said that Vale plans to build multiple "mega hubs" in places around the world where reliable energy can be obtained, and work with partners to produce hot pressed iron blocks, mineral processing, and other products. Previously, Vale had announced the development of a "giant hub" in the Middle East. This time, Baindou revealed that the second "giant hub" will be located in the Gulf of Mexico, which is rich in natural gas resources; The third place is Brazil, which has abundant water, solar, and wind resources and has the potential to become one of the largest green hydrogen producing countries.

Chinese demand will remain resilient

In recent years, with the phased adjustment of the Chinese real estate market, the demand for steel in China has decreased, and the import of iron ore has also decreased. Is the Chinese market still attractive to Vale?

Bai Anduo believes that in the long run, with the support of good fundamentals, China's steel demand will remain resilient and at a high level. The continuous promotion of urbanization and the development of the industrial sector will bring new opportunities to the demand for steel and iron ore in China. Cross border comparisons also indicate that China's demand for steel and iron ore may stabilize and maintain at a good level in the coming years.

In the first half of 2023, China's exports of durable goods such as machinery, automobiles, and household appliances grew rapidly, supporting the production of these products domestically and the steel demand in the manufacturing industry. The growth in demand for industrial products and the upgrading of the manufacturing industry will continue to provide growth opportunities for iron ore demand.

At the same time, China's continued emphasis on decarbonization measures and related investments will also bring new growth potential to demand for steel and iron ore. For example, investment in renewable energy and decarbonization of the power system will bring new demand for steel and iron ore.

Finally, despite short-term fluctuations in the Chinese real estate market, the urbanization process in China has not yet reached its peak, and sustained urbanization will support medium - and long-term housing and iron ore demand.