The s, a lot of things can happen. The President of the United States elected trump in the Wall Street elite glasses! Philippine President Du Teer, decisive pro-china diplomacy instantaneous disrupted the White House are anti-chinese layout rigorous, the eu established before, who thought that will have to take off the this Monday, however, these are implemented in 2016.
Oil and vale was once a cash cow for Brazil, the Brazilian government gradually get rid of the dependence on the IMF. However, the international price of crude oil from July 2008 peak of $147.27 a barrel, tumbled to $46.58 a barrel; While the international iron ore prices from $180 a tonne in 2011, fell to the current 80 dollars/tons.
On November 4, vale China long Mr Abe came to China. Brought us two messages: first, they have to sell nearly $10 billion of assets to reduce debt, including the potential sale of iron ore assets is about 5 billion dollars; Second, determine the S11D iron ore project will be completed by end of this year will be formally put into production, the formal shipment next year, to 2020 reaches producing gradually, the total production capacity will reach 90 million tons.
In 2016, destined to is a turning point.
To enter the Chinese market
In the vale of 74 years of development history, including more than 40 years, has the shadow of China.
Vessel of about 1973, vale for the first time reached China, has enabled more than 6200 ships, the ten hundreds of millions of tons of high quality iron ore in Brazil to China. But it is far from enough. Company, 340 million tons of iron ore output last year, nearly 180 million tons sold to China, according to China's total imports 953 million tons last year, vale is only about 18%, and the rest of the world two big mines Rio tinto and BHP billiton, compared in third place. Due to the very bullish on the Chinese market, the company in terms of iron ore supply side made a series of fruitful reforms, for of is to improve the company's share of the Chinese market.
Close contact with Chinese steel mills
Vale deal with baosteel first is through a few price negotiations begin. Baosteel has, as the representative of the Chinese iron ore price talks with Japan's Nippon steel, such as South Korea's posco steel sitting on the table, as the buyer, and the four big mine to discuss the future one year iron ore pricing problem.
As the largest iron ore demand in China, but there is no bargaining power, once for a period of time has been in a "also, lose your life". The bloody scene, presumably circle has clearly remember! And investigate its reason, is the result of arbitrary pricing model of iron ore, China since the beginning, then lost the bargaining power of iron ore!
How to talk about is the price? For decades, the price of iron ore is the world's largest mining companies and steel producers in the form of secret consultations. 2010 years ago, pricing mainly exists in two forms: the seller pricing monopoly pricing and negotiation.
Seller's monopoly pricing is vale group, Australia BHP billiton and Rio tinto's pricing model, four mines, highly concentrated on the upstream resources, become the framers of the iron ore pricing rules. First look at a few Numbers, the four giants of the world's iron ore (vale, BHP billiton, Rio tinto, fortescue) is the world's major iron ore producers and exporters, only iron ore output reached 1 billion tons in 2016, accounts for about 40% of the world. And every year China imports more than a few? 953 million tons, according to China's crude steel production 800 million tons, about a year need to consume more than 1.2 billion tons of iron ore, China's iron ore import dependency is as high as 80%. From the point of these years China's imported iron ore quantity, increase. In 2015, China's iron ore imports hit a record high of 953 million tons, is expected to break through again this year. Four mines such high market concentration overlay huge market demand in China, made four mine a few years ago a seller's market position.
Negotiate pricing refers to no matter what the first iron and steel enterprises and suppliers to price, it will be set by the price accepted by other global iron and steel enterprises and suppliers. Every year on April 1 to next year on March 31, for a fiscal year, the price for a year. Since 2003, China as the biggest importer, three on three separate negotiations, first simply fob price as a year of iron ore. Brazil, Australia's iron ore giant and Europe, Japan and South Korea steel pricing agreement first, then the contract price and then extended to the world, forcing others to accept. China has been a passive participation.
International iron ore negotiations in 2008 and 2010, the Japanese Nippon steel corporation and South Korea's posco first accept Itabira powder ore prices 65% proposal, after rising, $78.90 a tonne, and China, after more than six months of bitter talk, in the case of almost talk impasse, China was forced to accept 19% rise. In April 2010, BHP's proposed annual pricing to quarterly pricing, follow by the Rio tinto and vale. South Korea's posco accept vale ore price rise 83% to 86% of request, the contract between $100 - $105 / ton. And our representative of baosteel and CVRD iron ore price negotiations still failed. In 2010, the Chinese import prices rose to 100%, fob 128.38 usd/ton.
Beginning in 2011, BHP billiton announced that most export implement monthly pricing. At the same time, cif fob pricing benchmark by instead. Form of pricing strategy, make three major mines make POTS full. Iron ore prices in 2007, 2010-2013 to us $2010 / ton level, raise the cost of imports of iron and steel enterprises in China directly, and this price is far more than its reasonable level, we can only passively accept it. The iron ore price today? About $75 to $80, the minimum is 2015 $43.
China, the global steel workshop has brought years of prosperity to foreign mines, but as the economy and declining profitability, now is too fat. After 2011, as China's economic growth is slowing, and four mines during the unceasing expansion, overbuilt in iron ore, iron ore prices collapsed. But China is still as the largest iron ore consumer market, step by step to have a voice. Annual pricing cancelled in 2010, China's steel mills buy iron ore main quantitative not priced monthly contracts, namely the final settlement price is the contract signed a month before the platts energy grade of 62% iron ore index of average price. It seems fair pricing mechanism but does not mean that the grasp of the iron ore pricing power in China, due to the many overseas investment Banks to participate in, represented by platts index of the Singapore exchange bias trade influence global iron ore, and its overseas index, the dollar trading system, China's iron ore pricing little voice.
Change is under way, however, in addition to the supernatant by on-line iron ore swaps, dalian and north ore in positive action, also recently, BHP billiton's spot sales also USES my steel net price index, a big change in China's pricing model.
In the Chinese market become the goal, to dominate and vale began work closely with domestic steel mills. As early as 2007, start with baosteel vale espirito santo state in Brazil is a joint venture to build steel mills signed a letter of intent for investment. Is more complex, but the middle process after two years, since the project has not environmental permission, baosteel, out of the cooperation with vale. When Brazil's environmental agency concerned projects will generate air pollution, resulting in the loss of local water resources and the vale of the project from the design, production scale also cut in half to 5 million tons. According to the author, the cooperation in the early 08 has run aground after the financial crisis, but also highlights, vale efforts for the development of the Chinese market. Of course, the cooperation with baosteel is far from these. Company as early as in 2008 and 2011, in China zhuhai to henan anyang to establish joint venture with local steel mills pelletizing plant.
A fleet preemption in the Chinese market
In the face of the huge potential of Chinese market, vale hated myself far away from it. Compared to the Australian Rio tinto and BHP billiton, maritime from Brazil to China is three times as large as Australia to China. At that time, the Australian Rio tinto and BHP billiton to China freight per ton lower than vale ore tens of dollars, freight difference is close to the sale of iron ore prices. Moreover, a cargo ship from Brazil to China need about 40 days, and only 15 days to Australia to China.
Also means that vale boat is a start, and lost in time and freight to Australia two mines. The Brazilian iron ore in China's market share has been lower than Rio tinto and BHP billiton is the most important reason.
How to do? Vale, no less in terms of lower freight on over the years. First, he successfully set up your own super large ore fleet. Vale in 2008, the golden age of world shipping industry just announced the launch of its self-built fleet planning, is roughly $2.3 billion to build a fleet of 35 giant 40 ton freighter, which 19 by vale construction, another 16 USES the loan to complete. In 2012, vale has six giant iron ore cargo ship.
However, in the vale announced at the beginning of the self-built fleet, and strong opposition from the China shipowners' association, since the first half of 2011, China shipowners association began constantly wrote to the department of transportation, the national development and reform commission and other departments, public bemoan the vale as the world's largest iron ore producer, if I build again after huge fleet in the iron ore market will form monopoly, serious damage to China's steel industry and the development of shipping industry in China.
Although owner company specifically against vale self-built ship, but another leading role of the port and waterway industry - port industry has been completely opposite attitude. 40 ton ships dock can accept from dalian. The final days of the 2011, vale finally quietly pulled into the huge ships packed with iron ore port of dalian. This let has been strongly opposed to the Chinese shipping industry what about me! China shipowners association even send a letter to dalian hope that "never again".
Has not be allowed to dock in China vale decided to choose another way to log in "ship". So, vale and zhanjiang government, zhanjiang harbour and baosteel zhanjiang iron & steel co., LTD. Signed a strategic cooperation memorandum, plans to set up iron ore logistics and distribution center in southern China in zhanjiang harbour.
A sign the memo, immediately met with clear opposition. Owner is reported to the national development and reform commission, China put forward its own opinion, is probably the most "by the China shipowners and vale to form a joint fleet, CVRD ore is to come to China all ships to transport by a combination of the form. If vale to set up distribution centers in China, should be borne by the Chinese logistics enterprises, distribution and transport business". However, this scheme is not below.
In order to make full use of the advantage of 400000 tons ship oneself, close to China, Asia's important customer, vale had set out to build Malaysia set up iron ore distribution center. With 400000 tons ship from Brazil to deliver the goods to Malaysia first, then the goods to storage yard in Malaysia, there are different grades of iron ore, the purpose is to more flexible to satisfy the demand of the market. After mixing, the product can be sold to Japan, South Korea, China, etc. It is estimated that Malaysia distribution center can handle up to 30 million metric tons of iron ore a year.
However, in make full use of the distribution center, an important strategy in Malaysia, vale did not relax to get approved by China ship docked.
Cooperate with Chinese shipping companies to break the ice
In October 2013, the shandong with vale shipping co., LTD. Signed the "comprehensive strategic cooperation agreement" and "iron ore contracts, vale will give four valemaxes shandong maritime shandong shipping alliance business, sponsored by the contract amount more than $500 million. And on September 23, 2015, shandong shipping alliance business valemaxes "shandong wisdom" full berthing Dong Gu port of Qingdao port, it is a subsidiary of shandong shipping operating valemaxes compliance berthing at Chinese ports for the first time.
In September 2014, vale ocean shipments strategic cooperation agreement with China. According to the agreement, vale owned and operated four deadweight tonnage 400000 very large ore carriers will transfer to the cosco group, and for vale, a long-term lease 25 years. Vale will conclude with cosco group similar long-term transportation contracts, namely the cosco group will be built with vale is currently operating very large ore carriers deadweight tonnage similar 10 very large ore carriers, and to the global transportation Brazilian iron ore. Such a move. Broke the vale ban on cosco fleet, and cosco acquisition and relet four valemaxes, both recognition of CVRD self-built ore transport fleet, also help vale with a cash flow.
In September of 2014, China merchants a wholly owned subsidiary of the Hong Kong shipping with vale minghua signed a "strategic cooperation framework agreement. Signed agreement specifically, the proposed 25 years iron ore contract of carriage, the terms to discuss further. And for the performance of the transportation agreement, Hong Kong Ming proposed new creation 10 valemaxes. In march of 2015, China merchants shipping board approved the agreement. At that time, the industry analysts pointed out that the two companies' specific cooperation is about to fall to the ground. In may of 2015, China merchants ships with vale to shake hands again, signed the deepen strategic cooperation framework agreement, the agreement clearly beyond the expectation of the industry before, namely, merchant ships to vale announced plans to buy four existing valemaxes. And the long-term transport agreement is in the "deepening strategic cooperation framework agreement signed.
As a result, China merchants ships for performance of the long-term contract of carriage with vale, will be equipped with a total of 14 valemaxes. In September 2015, China merchants ships further promote the cooperation, the implementation of the acquisition of four valemaxes by minghua shipping is registered in Hong Kong "very large ore carriers of China shipping co., LTD." (English name: ChinaVLOCCompanyLimited). Analysts pointed out that this suit, cosco and China shipping joint venture of China ore shipped company the establishment of "China's mine", but in fact is the performance of the iron ore transportation agreement entity operators. During the same month, vale and China merchants signed long-term transport agreement in Hong Kong. The agreement of the contract period for 20 + 5 years, 20 years later, vale shall have the right to choose renewal for five years. Each voyage of the cargo is 390000 tons, the owner has the right to increase or decrease 10%, the annual freight volume is about 6 million tons. Accordingly, vale by merchant ships in 20 years will be at least 120 million tons of iron ore exports to China.
This means that a total of 32 is valemaxes and similar type can be used for the transportation of iron ore between China and Pakistan.
On July 4, 2015 in the morning, "far ZhuoHai" ore ship dock in Qingdao port Dong Gu port, this is the first time the Chinese government to allow 40 ton ore ship berthing of discharge (the world's largest bulk carrier). To according to the "far ZhuoHai", not only has about 350000 tons of iron ore from Brazil's companhia vale do Rio doce, there is the world's largest exporter of iron ore is the fullness of the "China dream".
Vale's approved by China ship docked at Chinese ports is its most crucial step to expand the Chinese market, then the next, and form a complete set of marketing strategy is to strengthen cooperation with China's important port, and set up distribution centers, improve their spot sales proportion.
China's iron ore distribution center is established
Earlier in 2007, the vale to dalian port and Qingdao port iron ore distribution center in China, but the plan from the start resistance and opposition from the Chinese steel industry. Qingdao port distribution center plan has spread the message of veto by the Chinese government for many times, and dalian port chairman secretary hong-bo zhu said that dalian port since after signing agreement with vale and no specific cooperation. Vale had only iron ore distribution centers were built in the Philippines and Malaysia.
By the end of 2014, the vale of stalled plans to set up distribution centers in China and see the dawn. On December 9, vale and Qingdao port in Rio DE janeiro, Brazil signed the "Qingdao port and Madeira port to establish friendly relations of port agreement", the two sides will jointly forge iron ore distribution centers. This is the world's largest exporter of iron ore for the first time set up distribution centers in China, the domestic iron and steel enterprises will not have to bypass the distribution center in Malaysia, is expected to be according to the direct import from Qingdao port to port price vale high quality iron ore. According to the agreement, Qingdao port group and vale will increase between Qingdao port and Madeira port iron ore trade cooperation and common commitment to Brazilian iron ore exports to China build a convenient and efficient logistics channels, hand in hand to create the vale, Qingdao port iron ore distribution centers ", in addition to the two sides will also be in port planning, operation, process optimization, energy conservation and emissions reduction promotion ways to cooperate.
It is known that Qingdao port distribution centers currently stockpiling capacity has reached 55 million tons of iron ore, again depending on the country's largest 40 ton ore terminal and with the mixed ore of form a complete set of processing business, the future may be set up for the whole ore logistics distribution center of northeast Asia.
Set up a distribution center, China's iron and steel enterprises can be in Qingdao port yard will have a mixing different grade of ore and get the middle grade of iron ore, directly into steel furnace steelmaking. Lowered the iron and steel enterprise logistics and inventory cost. Vale has been called the mixed ore business "Dong Gu standard mine".
The vale in dalian, tangshan caofeidian, Dong Gu port of Qingdao, yantai, Shanghai and zhoushan rat sea lake built six mixed ore center.
Suffer from ore price plunge
Three major mines in the process of competing, although ore prices blow at the same time, but no one take the initiative to take the lead in production, this time, instead, you continue to behave the acceleration of the pace of production, until 2016, the expansion of three parties, slower pace of vale to maintain production unchanged this year.
Vale is a quarterly loss for the first time in 10 years
In the third quarter of 2015, vale a net loss of $2.117 billion, this is the first time in nearly a decade the company has suffered similar losses. Although the number of iron ore to China is still growing, but the price falling sharply damage the vale of the income statement.
In November 2015, Brazilian Samarco tailings dam accident, also let vale, Brazil is Samarco vale and BHP billiton joint venture, mainly produces high quality pellets and direct reduction pellets, tailing dam accident last year, let both sides facing a $43.5 billion compensation, this huge reparations also contributed to the loss of the company.
From vale debt table, vale in 2016 for debt repayment peak, related to the debt repayment is expected cash outflows of $7.77 billion. By the end of 2015, vale a total debt of $28.85 billion, $25.23 billion net debt. Look from the repayment time, over the next three years the due debts of $2.01 billion, $3.12 billion and $3.59 billion respectively. However, given the corresponding interest payments and repurchase, leasing or other obligations, in 2016 will be the largest in vale's cash flow pressure for a year, after the pressure gradually reduce, is expected to corresponding cash outflow of about $2017 in 7 billion, in 2020 to about $5 billion per year on average.
Debt coping, it is imperative to divest assets
Mining experience winter period, many mining companies started by selling assets to repay debt, through the winter. And vale China long Mr Abe's trip, also illustrates the company formally iron core asset sales have nailing on the plate.
January to September this year iron ore prices rose 30%, the company's profit and revenue are slightly better than expected. But the next two years the company is expected to cash flow from operating activities is relatively limited. As of the end of the third quarter of this year, vale's net debt of $25.965 billion. The vale's plan is to reduce debt levels to $15 billion to $17 billion.
For a long time, a good credit rating is vale can easily from the international market the key to low cost, wholesale funding. However, in the past two years, the world's major rating agencies downgraded continuously, the credit rating of vale.
In December 2015, Samarco tailings collapse makes company's credit rating to "Baa3", namely investment grade level finally. Announced in March 2016, in the vale of business performance published in 2015, moody's will further its rating to "Ba3, due to the recent ore price rebound, corporate earnings before slightly better, moody's adjusted to the vale of credit rating, from relative to" negative "adjustment to the" stable "outlook, and reiterated" Ba3 level "as the company's rating. The agency warned that the "expected iron ore prices will remain at a low level for a period of time, due to China's economy slows metal prices the fundamentals of key factor of economy and the demand for steel, making profits will not have a fundamental change." According to moody's report, the company may face the prospect of downward pressure, if the deterioration of the sales of iron ore and base metal.
Since 2013, vale began a wide range of stripping logistics, aluminum, chemical fertilizer, the competitiveness in the field of energy, precious metals, coal and other assets. Given the current on the debt, management, finance and capital expenditure pressures, in 2016, vale plan by spinning off, indirect equity joint venture, transport fleet, precious metals, energy and other non-core assets, realize recycling to $40-5.5 billion. That, however, can only cover 2016 capital expenditures budget ($5 billion). In order to further deal with debts of pressure, just have a chief executive for the overseas MuLi put forward disposal of $10 billion over the next two years Mr Core assets.
From the point of this year, in June, vale by spinning off its three very large ore carriers of transaction recovery funds of about $269 million. The buyer for the icbc international (icbc international is a wholly owned subsidiary of industrial and commercial bank of China) as the leading a consortium, the current Vale has four ship load 400000 tons of ore, and plans to sale or lease again. And the sale of iron ore assets in advance.
Vale announced on May 25, 2016, the Hong Kong stock exchange has approved the HDR retreat city plan, will take effect on July 28. As listed in Hong Kong depository receipts of the first enterprises abroad, as the iron ore market is declining, vale, away from the line of sight of Chinese investors again.
However, in the face of global commodity prices remained low, as well as its already facing or may face a series of problems, expected future vale operating pressure will only increase, not reduce. Yet, as the strength of strong global mining giant, vale may "fall" is not big, not just because of its operation and management will suddenly deteriorated to such a situation, the most important thing is that no matter who came to power in the future, the Brazilian government will not allow vale fell, in a crisis is bound to be a helping hand.