Vale's Global Iron Ore Strategy
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Jose Hurtado OjedaVale's Global Iron Ore Strategy
Uploaded by
Jose Hurtado OjedaVale Pellets – Reliable Supply to the DR Market
5th World DRI and Pellet Congress - Dubai, UAE | 26-27 April 2017
Humberto
1
Oliveira – Head Technical Marketing , DR and India Markets and
SE Asia
Disclaimer
This presentation may include declarations stating Vale’s expectations concerning future events or
results. All declarations, when based on future expectations rather than historical facts, involve
various risks and uncertainties. Vale cannot guarantee that such declarations will prove to be
accurate. Such risks and uncertainties include factors related to the following: (a) countries where
we have operations, especially Brazil and Canada; (b) the global economy; (c) the capital
markets; (d) mining and metals businesses and their dependence on 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 additional information about factors that could give rise to results different
from those estimated by Vale, please consult the reports filed with the Brazilian Securities
Commission (CVM), the Autorité des Marchés Financiers (AMF), the US Securities and Exchange
Commission (SEC), The Stock Exchange of Hong Kong Limited, and, in particular, the factors
discussed in the “Estimates and projections” and “Risk factors” sections of Vale’s Annual Report –
Form 20F.
genda
1. Vale’s iron ore supply chain overview
– Brazil operations
– Integrated supply chain: Vale a unique and truly global iron ore
supplier
– Main accomplishments
2. Pelletizing at Vale
– 50 years of reliable supply to the market
– Production and sales
3. DR Pellets
– Production Challenges
– Why use DR grade? Value in Use
4. Oman pelletizing plant
– Optimizing value in long-term for Vale's clients in the MENA
region
1.Vale’s iron ore supply
chain overview
Vale’s integrated supply chain offers operational flexibility to reach
customers with the right product at the right time.
22 mines in 4 13 pelletizing
production plants (Brazil
systems and Oman)
3 railways and 4 2 DCs and 5
ports in Brazil blending ports
5
Source: Vale
Vale operates four integrated iron ore production systems
in Brazil, comprising mines, mineral processing plants,
railways, and port facilities.
Northern System
Reserves(1)(2) (Bi t) 7.0
‘ Grade (% Fe) 66.7
2015 production (Mt) 129.6
PA 2016 production (Mt) 148.1
5 mines
Southern and Southeastern
Systems
Southern Southeastern
Reserves(1)(2) (Bi t) 5.0 5.5
Western System Grade (% Fe) 46.4 44.3
Reserves(1)(2) (Bi t) - MG 2015 production (Mt) 98.8 113.0
MS 20 mines
Grade (% Fe) - 2016 production (Mt) 95.7 102.7
2 mines
2015 production (Mt) 4.5
Reserves(1)(2) (Bi t) 17.5
2016 production (Mt) 2.3
Grade (% Fe) 53.8 Vale
Note:
(1) figures in billion metric tonnes of ROM on wet basis (Bi t).
2015 production(3) (Mt) 345.9
(2) Samarco’s reserves (2.91 Bt) not included. Vale's equity interest in Samarco’s mines is 50%.
6
(3) Including third party purchase
2016 production(3) (Mt) 348.8
The above figures include non-operating mines: S11D and Apolo.
6 Source: Vale’s statement of reserves. Form 20F/ 2015 (submitted on March 31st , 2016)
The complexity of its integrated supply chain makes Vale an
unique and truly global iron ore supplier.
Brazil
Northern System
PA
MG
Western MS
System Southeastern
Southern System
System
Value chain
Blend &
Mining Beneficiation Railway Pelletizing Port Shipping
distribution
7
7
We also operate a distribution center in Malaysia, and we can use
blending facilities in China, with the aim of getting even closer to the
company’s largest market – the Far East.
China
• Ports for performing blends in China
are spread along the coast.
South Korea • Flexible lot in Chinese ports: > 50kt
Japan
China • More flexibility in terms of logistic
Taiwan
models (small vessels, barges, train,
India
trucks)
Vietnam
Malaysia
Malaysia
Blending
DC
Indonesia facilities in
China
Malaysia DC
Dalian
Caofeidian Yantai
Dongjiakou
30
Installed capacity
Mtpy Lianyungang
• Delivery to Asia ranging from 1
to 10 days Brazilian blend Shulanghu
fines better
stability!
8
8
9
With S11D, Vale will achieve unprecedented levels of competitiveness
and price realization
Railway
New Berth IV
• High-grade hematite ore type with iron ore
grade of more than 66% on average
• 90 Mt per year of nominal capacity
• First shipment in January 2017
2. Pelletizing at Vale
12
Pelletizing at Vale
13 Plants: 11 plants in Brazil and 2 in Oman. In Brazil, 8 plants are located in Vitória, at
Tubarão Complex, 2 are located in Minas Gerais state (Fábrica e Vargem Grande) and 1
located in São Luís, Maranhão state.
64.2 Mt/year of Licensed Capacity ¹
São Luís
Pellet Plant
Oman Plants
Tubarão Complex:
Plants 1 to 8
1 Excluding: Minas Gerais: Plants
12 (30.5 Mty);
JV Samarco Fábrica and Vargem
Grande
JV Annyang & Zhuhai (2.4 Mty)
14
Pelletizing at Vale
14
Historical DR Pellet Production
Over the years, Vale has already produced Direct Reduction Pellets at three different sites:
Vitória, São Luís and Oman. In recent years there has been a significant increase in the supply of
DRP by Vale, achieving a new annual record in 2017 with the production reaching 17.3 Mt.
20000
18000 Accumulated Production : 273 Mt
16000
14000
DR Pellet Production (kt)
12000
10000
8000
6000
4000
2000
0
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Tubarao SL Oman
15
Vale’s Pellet Production
2015 (46.2 Mt) 2016 (46.2 Mt)
16
Vale products and markets - 2016
Vale pellet product mix (%) Comments
DR Pellets • In 2016,Vale’s annual pellet production achieved
46.2 Mt, in line with 2015, despite the stoppage of
Fabrica pellet plant at the beginning of the year.
• Although the pellet production has been similar
between 2015 and 2016, the percentage of DRP in
Vale mix increased + 9% (+4.0 YoY), reflecting the
efforts that the company has done to meet the strong
Vale DRP end markets(%) demand in this market for premium products.
North Africa • 03 main destinations: GCC, America and NA,
21%
(3.8 Mt) 25%
Americas (4.5 Mt)
representing more than 90 % in 2016
Asia (0.6 Mt) 3%
3%
Europe (0.6 Mt)
47%
17 GCC
(8.3 Mt)
3. DR Pellets
18
19
DRP Production – Challenges
• Since the DRI process requires lower impurities compared to BF process, Vale has
Iron Ore used on
DRP production designed DRP aiming Fe content above 67.75%, using only high-purity and low gangue
iron ores
• The processes employed to upgrade run-of-mine iron ore into DR Grade demands
significant investments in beneficiation technology and high OPEX.
• Besides the investments required, the production of DR grades is not economically
feasible in all the mines, restricting the capacity of DR pellets production
Conceição Itabiritos II Cauê Itabiritos
Recent
Investments In the second quarter of 2015, we The adaptation of the plant to
completed the adaptation of the process low-grade itabirites from
existing plant to process lower grade the Itabira mining complex is
itabirites from the Conceição mine. underway.
Nominal production capacity is 13 Nominal production capacity is 18
Mtpy of a pellet feed and sinter feed Mtpy of a pellet feed and sinter feed
mix. mix.
Why use DRP: Mathematical model of integrated steel production approach
The mathematic model consists of several equations to represent the steel
production process (mass and heat balance) and consider the main trade-offs of this
route.
Lump A Power
Flux
Gas consumption
Lump B
Scrap
Pellet 1
Pellet 2
DRI chemical
composition and
metallization
Pellet 3
Costs
Pellets
Natural Gas
Power
Scrap
20 Flux
Oxygen
Methodology - Scenarios
Base Case
Pellet A Pellet B Pellet C
DRI
The metallic charge of EAF is composed
Analysis Case by DRI + Scrap
Pellet A Pellet B Pellet D
Direct reduction impacts Electric arc furnace impacts
Specific consumption of pellets Specific consumption of metallic charge, flux,
Chemical composition, metallization and power and oxygen
carburization of DRI Tap-to-tap variation due to power consumption
variation
21
Why DR Process requires high grade pellets?
100%
Blast furnace pellet utilization in Direct
Reduction process implies on the reduction of
DRI quality and reflects negatively in
operational parameters in EAF
80% 20%
BFP composition effects on DRI quality DRI composition effects on Electric Steelmaking
(Base Scenario vs Using BF Pellet) (Base Scenario vs Using BF Pellet)
22
4. Oman pelletizing plant
– Optimizing value in long-term for
Vale's clients in the MENA region
23
Since its start-up, Vale Oman has produced over 41,5 Mt of pellets
to fulfill the growing demand in the region, delivering high
premium quality
Annual production (Kt/y)
9,046
8,608
8,280 8,121
7,848 Average of Quality - Shipments
6,616 Fe > 67.7%
SiO2 + Al2O3 < 2.0%
P <0.030 %
Metallization > 94%
CCS > 300 daN/p
2,097
Abrasion < 3.5%
< 5 mm < 0.3%
2011 2012 2013 2014 2015 2016 2017*
* Forecast
Vale Oman provides Quality DR pellets closer to
customers
In addition to
consistent
quality: Adabeyah: 8.6 Days
Ain Sokhna: 8.6 Days
Jubail: 1.7 Days
Dammam: 1.6 Days
Mesaieed: 1.3 Days
Abu Dhabi: 1.0 Day Sohar: 2.0 Hours
Mumbai: 4.8 Days
Safe sourcing
Just-in-time
Improves customers cash flow /
working capital / low stock
Malaysia: 12.7 Days
Omanization level of 55% has been achieved
after 5 years of operation
Shukran – Thank you!
Common questions
Powered by AIVale's integrated iron ore supply chain includes mining, beneficiation, railway, pelletizing, port, and shipping operations, which are distributed across Brazil and Oman. This integration provides operational flexibility that ensures the ability to reach customers with the right product at the right time, enhancing global competitiveness by allowing Vale to be closer to major markets, such as the Far East, through distribution centers in Malaysia and blending facilities in China .
Vale is considered a truly global iron ore supplier due to various factors, including its extensive integrated supply chain with global distribution centers and blending facilities in key markets such as China and Malaysia. Its diversified operations across Brazil and Oman, combined with advanced technologies and logistic models, provide flexibility in supply and delivery to meet client demands worldwide. This global network ensures competitive advantage and market reach .
Vale faces several challenges in producing DR grade pellets. These include the need for significant investments in beneficiation technology and high operational expenses due to the stringent requirement for high-purity iron ore. Additionally, not all mines can economically produce DR grade ore, restricting production capacity and limiting the ability to meet market demand for premium DR pellets .
Vale's strategy to operate pelletizing plants in both Brazil and Oman optimizes value by ensuring consistent supply and meeting regional demand for high-quality pellets. The Oman plant, in particular, is positioned to serve the growing MENA market by offering just-in-time delivery and premium quality that improves clients' cash flow and reduces stock levels. This strategic location also facilitates proximity to major markets, enhancing customer satisfaction and loyalty .
Vale's blending facilities in China are pivotal to its supply chain strategy as they enable the company to be geographically closer to Asia, its largest market. These facilities allow for customized blending of iron ore products to meet specific customer requirements, providing better stability with products like Brazilian blend fines. They offer logistic flexibility by using various transportation methods, thus optimizing delivery and meeting diverse customer needs .
In 2016, Vale maintained its annual pellet production at 46.2 Mt, similar to 2015, despite the stoppage of the Fábrica plant. However, the percentage of DR Pellets in the product mix increased by 9%, driven by strong demand for premium DR grade products, particularly in key markets like the GCC, Americas, and Europe, which accounted for more than 90% of Vale's DRP sales .
Vale's Oman pelletizing plant offers significant advantages within the MENA region by producing high-quality DR pellets with over 67.7% iron content, low impurity levels, and high metallization. The plant ensures close proximity to regional customers, allowing for fast, reliable delivery, thereby improving customer cash flow and reducing inventory costs. Furthermore, it supports Vale's strategic push to serve the growing steel production needs in the region .
The DR grade pellets production process at Vale involves using high-purity and low-gangue iron ores to achieve a Fe content above 67.75%. This high grade minimizes impurities, which is crucial for the DRI process as it requires lower impurities compared to the Blast Furnace process. Reducing impurities ensures better metallurgical performance and energy efficiency in steel production .
Using blast furnace pellets in the Direct Reduction process negatively affects the quality of Direct Reduced Iron (DRI), which in turn impacts operational parameters in Electric Arc Furnaces (EAF). Such substitution leads to decreased metallization and higher impurities, necessitating adjustments in EAF operations, such as increased consumption of flux, power, and oxygen, and potentially reducing overall efficiency and increasing operational costs .
The S11D project holds strategic importance for Vale, as it marks a significant improvement in competitiveness and price realization. The high-grade hematite ore from S11D with an iron ore grade exceeding 66% enhances product quality. Furthermore, the project's 90 Mtpa nominal capacity and the use of cutting-edge technology are designed to lower costs and emissions, making Vale more competitive in the global market .
