Vale sees China slowdown softened by weaker currency
Depreciation of the real also counters cost increases, says Brazil's largest exporter
Vale, Brazil's largest exporter, said further local currency depreciation could counter cost rises and a slowdown in Chinese iron ore demand as it seeks to recapture market share from Rio Tinto and BHP Billiton.
China's iron ore and steel demand growth was set to slow to about 5 per cent from 10 per cent in the first five months of the year, he said.
"The Brazilian currency will devaluate further," Martins said last Friday at the company's Rio de Janeiro headquarters. "The slowdown in China is negative, devaluation is positive because not only our costs in dollars will be reduced but also investments will be lower."
Vale is seeking to return to profit growth and boost investor confidence by cutting costs, selling assets and focusing on the iron ore business, its most lucrative unit. The company, the worst-performing major mining stock this year, posted first-quarter profit that surpassed analysts' expectations for the first time in eight quarters.
The real has lost 7.8 per cent against the US dollar in the past three months, taking it to its lowest rate in four years as faltering economic growth and speculation the United States Federal Reserve will pare back monetary stimulus lured money away from Latin America's biggest economy.