Weaker Demand Weighs on Brazil Miner Vale's Profit

The world's biggest iron ore producer, Brazil's Vale, posted first-quarter net profit of $1.36bn on Thursday, down one third from $2.02bn a year ago as the economic crisis hit demand for the steel ingredient.
Vale, one of the world's top three miners, said earnings before interest, taxes, depreciation and amortization - a key measure of cash flow known as EBITDA - fell to $2.28bn from $3.7bn a year earlier under US Generally Accepted Accounting Principles.
Net earnings were barely changed from the fourth quarter of 2008, reaching $1.36bn compared with $1.37bn then when the global economic plunge had already taken hold.
Analysts had predicted Vale, one of the world's top three miners, would post a net profit of $1.34bn and EBITDA of $2.45bn for the quarter, according to the average forecast of five analysts surveyed by Reuters.
The company cut iron ore output by 10%, or about 30 million tonnes, and idled six pellet plants equating to about a third of pellet capacity in response to a sudden drop in demand for iron ore after the global economic crisis erupted.
It also shut down nickel mining operations in Ontario, Canada, for an eight-week period.
The average price Vale received for iron ore fell to $62.79 per tonne from $73.92, due to an increase in sales to Asian clients where it has enacted temporary discounts of up to 20% on the benchmark rate.
Announcing the discounts last month, Vale said the measure would align its rates more closely with the spot price and stir weak demand.
"Except for China, demand for iron ore remains extremely weak, with Japan, the second-biggest importer, reducing its purchases by 34.4%," compared to the first quarter of 2008, Vale said in its earnings report.
Iron ore output for the company fell 37% in the first quarter from a year ago, while its pellets production fell 73%, Vale reported in late April.