The sudden devaluation of iron ore is an irrational move, and the best thing for companies is to “watch from the stands” the commodity’s fluctuation, without “playing the game”, says the president of Anglo American in Brazil, Wilfred Bruijn, Bill . To state, he recognizes that instability creates an unknown about the price to be released by companies in the 2022 budget.
Last week, the “spot” price of ore with 62% iron content for delivery in China, the product’s reference, accumulated losses of US$ 30 from Tuesday to Thursday, negotiated at the lowest value in six months. On Friday, the ore recovered US$ 7 of losses, quoted at US$ 140.44 a ton, but the feeling was still of caution.
For Bruijn, the devaluation stems from the Chinese government’s regulatory measures to reduce steel production, which would result in lower demand for ore.
“The feeling was that the crash would stop at some point, but that’s not what happened. The price continued to fall”, says the executive. “It’s something more emotional for a market that seeks a new level. I can’t say if the next move will be another 20% drop or a 20% rise.”
Despite the recent low, the commodity remains traded above pre-pandemic values. In February 2020, the product was sold at close to US$ 80 a ton, almost half of the price on Friday. The advance would be the result of a “tight” market, the result of the little additional supply of ore in the world and a growing demand, especially from Chinese steelmakers.
Bill explains that the price fluctuation ends up reflected in the balance sheet, since the company does not “lock” the quote in hedge operations. Anglo American should produce, this year, 24 to 25 million tons of iron ore in the Minas-Rio system, in Conceição do Mato Dentro (MG). The production is mainly exported to China, South Korea, Taiwan and the Middle East.
Uncertainties should not affect the country’s investment plan. According to Bill, US$ 200 million are being invested in the Minas-Rio system, which, in addition to the mine, has a beneficiation plant and a 529-kilometer long pipeline to Porto de Açu, in Rio. another US$250 million will be invested to improve the operation and maintenance of the operation.
Anglo’s Brazilian unit is still working to meet, this year, the goal of using 100% renewable energy in its activities, including a portion of self-production. According to him, today, 96% of the energy consumed by the local operation is renewable, including wind and solar. To reach the 100% target, the company is just waiting for the expiration of an older energy contract. The information is from the newspaper The State of São Paulo.
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