Brazilian miner Vale expected the global seaborne metallurgical coal market will rebound in the fourth quarter, amid continued recovery in global industrial and construction activities, coupled with the possible strong replenishment in China with new import quota for 2021.
“The impact of regional COVID-19 lockdowns, driving steel production cuts, and the exhaustion of import quota in China due to its rapid import rate earlier in the year put pressure on the market until late August,” Vale said in its financial report.
Prices rallied thereafter and reached $139/t by the end of September. A wide import arbitrage of over $30/t attracted some Chinese buyers to take positions and buy cargoes using 2021’s import quota, according to Vale.
Many countries had begun easing lockdown restrictions, lifting demand for coking coal as global steel production gradually picked up, with nearly a third of ex-China idled blast furnaces returning to duty, Vale said.
Vale produced 1.40 million tonnes of coal over the third quarter, slumping 40.4% year on year yet up 9.3% from the second quarter, with metallurgical coal output at 756,000 tonnes (-25.9% YoY, 8.3% QoQ) of and thermal coal 646,000 tonnes (-49.9% YoY, 10.4% QoQ).
Vale also expected an improved market for iron ore in 2021, with WSA forecasting stability in steel production in China as economic activity normalizes. Other regions ex-China are expected to partially recover with steel demand growing 9.4% in 2021 led by more expressive recovery in India, ASEAN (Association of Southeast Asian Nations), Turkey and Europe.
However, Vale notes that risks still remain with the resurgence of COVID-19 cases mainly in Europe, which could hinder the economic recovery started in 3Q20.
Vale’s iron ore output totaled 88.68 million tonnes in the third quarter, up 2.3% YoY and 31.2% QoQ. Its sales stood at 65.76 million tonnes (-11.2% YoY, 20.4% QoQ).
Vale’s net operating income was logged at $10.76 billion, up 5.33% year on year and a 43.15% increase from the previous quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $6.095 billion, up 32.41% on the year and surging 80.8% from the preceding quarter.