Vale's Choice Vale的选择 International Steel and Minerals Conference (April 15 -18 th, 2009) 2009冶金矿产品国际会议(2009年 4月15 -18日) José Carlos Martins – Executive Officer for Ferrous Minerals 马定思-执行董事
Disclaimer 免责声明 “This presentation may include declarations about Vale's expectations regarding future events or results. All declarations based upon future expectations, rather than historical facts, are subject to various risks and uncertainties. Vale cannot guarantee that such declarations will prove to be correct. These risks and uncertainties include factors related to the following: (a) the countries where Vale operates, mainly Brazil and Canada; (b) the global economy; (c) capital markets; (d) the mining and metals businesses and their dependence upon 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 further information on factors that may give rise to results different from those forecast by Vale, please consult the reports filed with the Brazilian Comissão de Valores Mobiliários (CVM), the French Autorité des Marchés Financiers (AMF), and with the U. S. Securities and Exchange Commission (SEC), including Vale’s most recent Annual Report on Form 20 F and its reports on Form 6 K. ”
Agenda 会议议程 q Market outlook 市场展望 q The history of the benchmark system 基准协议价机制的历史 q Structural change in the industry 行业结构性调整 q The positioning of Vale的定位 q Final comments 总结
Market outlook 市场展望
Chinese market is showing clear signs of market recovery 中国市场显露明显复苏迹象 Breakdown of the RMB 4 trillion Investment Program 4万亿救市资金的分配 自主创新和 结构调整 医疗、教 育及文化 保障性安 居 程 生态环境 建设 农村基础 设施建设 铁路、公 路和机场 等重大基 础设施建 设 Source: NDRC, CEIC 震后重建 中国PMI指数 及 业生产指数
China: exports growth rebounded significantly in March 中国：出口在三月份出现明显反弹 Seasonally adjusted month-on-month exports growth rebounded to 7. 5% in March Source: China Customs
Steel end-user performance in China 中国钢铁最终用户表现 日发电趋势 (100 million KWh) Daily power generation trend. MKWh) Daily average Yo. Y ü Steel consuming sectors are showing signs of recovery in China…钢铁消费板块显露复苏迹象… Chinese floor space under construction and apparent steel demand中国在建楼面及钢材表观需求 Monthly vehicle sales and production汽车月销售及产量 Sources: Umetal, China Metals, Macquarie, China Auto Market
Steel production and iron ore demand in China 中国钢铁产量及铁矿石需求 China imported a record 52 Mt of iron ore in March, taking total purchases in the first quarter to 131 Mt, up 18% from a year earlier. The import surge reflects a recovery in production at Chinese steel mills, spurred by the government‘s economic stimulus package. 3月份中国进口铁矿石 5200万吨，创有史以来最高记录。一季度总量更高达 1亿 3100万吨， 比去年增长 18％。进口量的猛增反映了政府刺激政策下中国钢厂产量的回升。 粗钢产量 Sources: CISA and China Customs 铁矿石进口量
Iron ore supply situation 铁矿石供应情况 We estimate that at current market prices around 100 Mt of high cost iron ore supply will be replaced by more competitive producers 我们估计当前市场约有1亿吨高成本铁矿石供应将被更具竞争力的生产商代替 Estimated cash cost for Chinese and Indian ore 中国和印度矿的现金成本估算 US$/ton CFR Around 100 Mt high cost production is uneconomical at current price levels Current spot price level + 当前现货价格 约 1亿吨高成本矿在 目前价格情况下没有 竞争力 Mtpa Sources: Credit Suisse, Vale estimates
The history of the benchmark system 基准协议价机制的历史
Active since 1969, the benchmark price negotiation involves extensive discussion over market conditions among the major players 自 1969年以来，基准协议价谈判是主要矿石供应商与钢铁企业 基于市场条件参与并广泛讨论 THE PRICE NEGOTIATION PROCESS 价格谈判过程 BUYERS买家 欧洲钢厂 European Steel Mills (Arcelor. Mittal, TKS, Corus, ILVA) 亚洲钢厂 Asian Steel Mills (NSC, JFE, POSCO) 中国钢厂 Chinese Steel Mills (Baosteel宝钢) SELLERS卖家 买卖双方对市场前景和 预期进行交流，共同商 议并达成协议价格 Brazilian Supplier (Vale) Exchange views about market expectations and conclude a benchmark price 澳洲供应商 巴西供应商 Australian Suppliers (BHP, Rio Tinto) 其他供应商 Other Suppliers (QCM, IOC, SNIM, LKAB and KUMBA)
The first pair of representative partners to conclude a deal settle the benchmark price for the iron ore industry. 第一对买卖双方代表达成一致的价格将视为当年铁矿石行业的年 度基准协议价格 NEGOTIATION PERFORMANCE (% OF FIXTURES SINCE 1969) 自 1969年起达成协议价各方比例统计 BUYERS买方 Ø European steel mills have been involved in settling the benchmark for a longer period. 欧洲钢厂参与价格谈判的历史较长。 SELLERS卖方 Ø And so does Vale也是如此。
Benchmark price system advantages 基准协议价机制的优势 q A Face to Face dialogue between buyer and seller; 买家与卖家间面对面地直接对话 q No exposure to speculators or intermediates as in commodity markets; 没有像其它商品市场中投机者与中间者的介入情况 q Better understanding between the players about present and future perspectives; 买卖双方对现状与将来能有更好的认知 q Market rules stability leads to long term investments plans to expand capacity which will tend to balance supply and demand; 稳定的市场机制有助于持续稳定的长期投资增加产量，最终形成平衡的 供需关系 q Improves long-term relationship among the players. 有助于建立买卖双方长期友好关系
Benchmark System Reduces Price Volatility 基准协议价机制能减少价格波动 铁矿石及其它主要交易商品价格对比
Benchmark x Spot Price System 基准协议价 x 现货价体系 ü ü Spot Market现货市场 Benchmark基准协议价体系 Global market trading ü 全球市场贸易采用 Covers all iron ore products (SF, PF, lump, pellets) 只限于中国市场 ü ü Low volatility for price and volume ü 较小的价格及供应量波动 ü ü ü Price set in direct deals between producers and consumers Limited mainly to low grade fines 覆盖所有铁矿石品种（烧结粉，精粉，块矿及 球团） Restricted to Chinese market ü 大多仅限于低品位矿 High price volatility 价格波动大 Intermediaries are the main players 中间者是主要参与者 供需双方的直接定价 No long-term commitments for volumes Commitment and reliability 缺乏长期供需数量上的相互约束力 约束性和可靠性
Structural change in the industry 产业结构性调整
Seaborne iron ore trade registered an average growth above 9% per year since 2001 with Chinese market accounting for more than 50% of its trade in 2008 自 2001年起，中国市场的进口铁矿石平均每年增长 9％，中国市场占 2008年铁矿石贸易量的50％以上。 Seaborne trade (Mt)铁矿石海运贸易量 Mt CAGR 01 -08 843 +9. 3% 780 725 603 World 452 484 670 +24. 9% 537 China中 国 +1. 8% Rest of the World China as a % of total 20% Sources: UNCTAD, CRU and Vale estimates 40% 52%
Due to strong Chinese demand, expansions were accelerated and greenfield projects were developed 由于中国市场的强劲需求，矿山公司更多的扩张计划在加速开拓， 新建项目也在开发之中 Seaborne supply 02 -08 2002 -2008年海运铁矿供应 Greenfield additions (higher costs = higher prices) Spot market / non traditional players Brownfield expansions Source: Vale
Seaborne supply constrains have resulted in Chinese traders searching for iron ore all over the world 由于矿石海运供应量的限制，导致中国贸易商全球范围内搜寻矿石 The number of exporting countries to China has reached 35, the double of 7 years ago 现已有35个国家向中国出口铁矿，比 7年前翻了一倍 Source: Vale
Spot market brought high volatility to the industry trading well above benchmark system in recent years 近几年来，现货市场带给行业的波动远远超出基准价 Iron ore benchmark and spot prices*铁矿石基准价和现货价 Only in this period, for the first time in the last six years, spot prices are below BM prices. 最近，六年以来首次 现货价格低于基准协 议价格。 Source: Vale, Clarksons and My. Steel * SSF CFR Asia = SSF FOB benchmark + spot freight prices
This differential was captured by two main sources: the shipping industry … 造成价格差异的两大主要因素： 1）航运业 Since 2003, average freight rate was US$ 30/ton above long term prices*. The amount was captured by freight companies and not re-invested in the iron and steel industry. 从2003年开始，平均海运费高于长期租船价格US$ 30/ton 。这些钱是由航运公司获得但是没有再 投资到铁矿和钢铁行业 Iron ore freight prices 铁矿海运价格 Source: Clarksons * Average between 1996 and 2002
2）… and traders 贸易商的参与 Since 2003, average spot price was US$ 26/ton above Vale SSF CFR benchmark prices in China. 从2003年开始，中国平均现货价高于Vale南部标准烧结粉的到岸价US$ 26/ton。 Premium IO spot over benchmark 现货价和长协价差价 Additionally some mills also captured margins reselling benchmark iron ore in the spot market 此外，一些钢厂向现货市场转卖长协价的铁矿以谋取利润。 Source: Vale and My. Steel
The value of distortions caused by market unbalances 市场的不平衡导致价值的扭曲 Steelmakers paid much more due to market inefficiencies => Chinese steelmakers’ low exposure to LTC & COA’s 由于市场的供应量不足，钢铁企业付出了巨大的代价。中国钢企由于较少的长协和长期海 运租约，付出了更多的代价 Accumulated gains for spot players since 2003: more than US$ 13 billion 自 2003年起，现货市场参与者可累计获得超过130多亿美金 (Mt) Source: Vale and My. Steel (US$/t)
COA’s Coverage COA覆盖率 Although Chinese steelmakers have slightly increased COA’s coverage, their exposure is still very low. On the other hand, Japanese & South Korean peers’ average coverage to COA’s is above 90%。 尽管中国钢企已经增加COA的覆盖率，然而相比与日本韩国高达 90%的COA 覆盖率仍然处 于较低水平。 Coverage of COAs (%) COA覆盖率 （%） Average coverage of Japan & S. Korean steelmakers 日韩钢铁企业平均 Sample of selected Chinese steel mills 某些中国钢铁企业 Source: The Tex Report (sample of Chinese mills including Baosteel, Hebei Group, Shagang, Maanshan, Beitai, Wuhan, Shougang and Jinan) and CISA
New pricing developments have been observed 新的定价方式已经呈现 q Australians breaking away from benchmark system (negotiating freight differential) 澳洲铁矿石供应商偏离基准价格机制（寻求运费差价） q Surge of spot market (caused by severe shortage in China) 现货市场扩大（由于中国市场供应严重不足） q Development of market indexes (MB, SBB & Platt’s reporting actual spot transactions) 市场价格指数层出不穷（如反映现货交易的MB，SBB & Platt’s 指数）
Two main drivers of market disruption are more balanced in 2009 影响市场的两股力量在 2009年趋于平衡 q Iron ore supply and demand converging to balance 铁矿石供求趋于平衡 q Freight rates adjusting due to increasing numbers of COAs from both suppliers and clients and lower exposure to spot prices 由于来自铁矿石供求双方COA的增加和较低的现货运费需求，导 致运费的调整
Vale‘s adjustments for new market situation Vale公司对于市场现状的应对 q q q Discontinuity of lower grade ore production 停止低品位矿石的生产 Shutdown of higher cost operating units 关停高成本的运营单位 Reduction of administrative costs and seeking flexibility in labor contracts 降低管理成本并探寻灵活合理的劳务合同 Renegotiation of existing contracts with service providers 与服务供应商重新洽谈服务协议 Re-alignment of iron ore logistics system 重新调整铁矿物流体系 The combined effect of above mentioned initiatives was a 25% reduction of Vale's nominal iron ore production capacity 采取以上行动我公司将减少产能 25%。
The positioning of Vale的定位
The positioning of Vale and its initiatives Vale的定位和行动 q Continue to support and operate in the benchmark system, but remains searching for clear recognition of our superior quality 继续支持和保持长协机制的运作，但是继续探讨对于高品位矿石优势的认可 - Rising supply of low quality ores by competitors should help Vale to maximize the capture of value-in-use of its high quality ores (Carajas, in special) and pellets. 竞争对手加大低品位矿石的供应，使得Vale公司的高品位矿石的使用价值得到最大化 （特别是CARAJAS和球团矿） q Investment in a new fleet of VLOCs, used ships and COAs aiming at reducing freight volatility to China 通过对超大型矿砂船、改造船舶，和COA的投资，平缓到中国运费的波动性 q Analyzing further alternatives to enhance our competitiveness in China 寻求更多方法以提高VALE公司在中国的竞争力 q More CIF sales 更多到岸价销售 q Increase customer base in China 增加中国客户群
Vale’s main strategy is to be close to its customers Vale主要战略是更加接近客户 Place our products close to the customers, produce pellets, “blend” iron ore and distribute it from regional distribution centers. 将产品更接近客户，在中国生产球团，混矿并通过地区分销中心进行销售 Vale needs China, and China needs Vale Understand customer and provide solutions 了解客户所需并提供解决方案 Vale和中国唇齿相依 Increasing value Customer solutions fin St fre lo gi ig FOB ht oc kp ili st ic s ng an ce lla rit y Customer solutions China /b le nd in g Increasing differentiation integration ca pi Vale
Investing in shipping：Creating a shuttle service to China 投资建造船舶，对中国市场提供船舶穿梭服务 VLOCs already contracted: VALE已签约的超大型矿砂船 q Contract with Bergsen Worldwide (Contract of Affreightment): 4 vessels of 388, 000 DWT to carry 1. 5 million tons/year – deliveries in 2011/2012 4条 38. 8万吨船 年运力 150万吨 2011年/2012年下水 1 vessel of 274, 000 DWT to carry 1. 2 million tons/year - conversion into a VLOC – delivery in end 2008 // 1 条 27. 4万吨船 年运力 120万吨 （改造船） 2008年底下水 q Contract with NYK (Contract of Affreightment): 1 vessel of 298, 000 DWT to carry 1. 3 million tons/year – delivery in 2011 1 条 29. 8万吨船 年运力 130万吨 2010年下水 q Contract with Rongsheng Shipyard: 12 vessels of 400, 000 DWT to carry 21 million tons/year – deliveries in 2011/2012 12 条 29. 8万吨船 年运力 2100万吨 2010年/2011年下水 Second hand vessels: 改造船舶 q 8 vessels: 5 acquired in 2009 and 3 already owned by Vale 8条船: 2009年新购得 5条船, 另淡水河谷已经拥有3条船
Final comments 总结
Benchmark x spot price trade-offs: 基准协议价格和现货价格体系的对比 ü Benchmark（基准） Miners committed with steelmakers future production plans, securing ore Spot Market（现货） ü supply for their greenfield and brownfiels expansions 矿山公司给钢企以长期供货的承诺的同时也是其 ü 自身进行长期矿山开采以及矿山改造的保证。 ü Steelmakers are able to optimize iron ore inventory levels. Regular shipping schedule, aligned between suppliers and clients 钢企可以保持铁矿石库存水平的最优化。供需双 ü 方所达成的一致意见确保了规律的装运计划。 Stability to fix prices for end-users 钢企可以为最终用户制定稳定的钢材价格。 ü ü Price stability 稳定的价格 ü Miners have higher uncertainty on return on capital invested, tending to restrict expansions and future supply 矿山公司的投资回报率有很高的不确定性，无法保 证未来的规模扩张以及矿石供应。 Steelmakers to face higher uncertainty of ore deliveries. Mills to operate either with higher stock levels or face the risk of running out of iron ore. 钢企面临铁矿石供应的不稳定性，造成库存过多或 断料的危险。 Mills with increasing uncertainty to deal with end-users 增加了钢企给最终用户定价的不确定性 Price volatility 波动的价格 One cannot have the best of both worlds…鱼与熊掌不可兼得
The benchmark system is supported by traditional steel players from Europe, Japan and Korea regarding its benefits 基准协议价格机制一直受到欧洲，日本和韩国的传统钢铁生产商的 拥护和支持，受益于： ü Long term contract with fixed and assured volumes 长期合同保证了稳定的铁矿石供应量 ü Equalized yearly price change all over the world 全球范围内的年度价格变化得以平等 ü Reliability, confidence, trust and long term relationship between steel players and iron ore suppliers 增加铁矿石供应双方的互信度和长期合作
Vale‘s choice is the benchmark system. What is Chinese steelmakers´ choice? Vale的选择是基准价格体系！ 中国钢铁企业的选择是什么？
Thank You! 谢谢！
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