Vale S.A. VALE reported iron ore production of around 74.1 million tons for the second quarter of 2022, which was up 17% sequentially. Improvement at Southeastern Systems (mainly attributable to Brucutu, Itabira and Timbopeba) and upbeat performances in all operations at Southern Systems, particularly at Vargem Grande and Mutuca, led to the higher production numbers in the quarter. Northern System production improved, benefiting from better weather seasonality in June despite headwinds.

This brings the company’s year-to-date production to 137 million tons, which marks a 3.7% decline year on year. This is primarily due to a lower 6% drop in production in the first quarter on account of the heavy rainfall in Minas Gerais in January that halted the Southern and Southeastern Systems operations. Production in the second quarter of 2022 was down 1.2% on a year-on-year comparison.The company lowered its iron ore production guidance for 2022 to 310-320 Mt from its previous guidance of 320-335 Mt, citing the sale of the Midwestern System. Vale mentioned that it is adjusting production levels according to the current market conditions, and this decision is in sync with its “value over volume” philosophy.This lowered guidance might provide a much-needed boost to iron ore prices. Iron ore prices have been in a slump lately and have fallen below $100 per ton. Prices have been weighed down by apprehensions regarding weak demand from top consumer China due to the recurring COVID-19 outbreaks and low profitability at Chinese steel mills. Rising fears about a potential global recession-driven demand downturn continue to put pressure on prices as well.Coming back to Vale’s details for the second quarter, sales volumes of iron ore fines and pellets were around 73.2 Mt in the quarter. It represents a 23% increase from the first quarter of 2022. Compared with the second quarter of 2021, sales were flat. Pellet production was 8.7 Mt in the quarter under review, up 25% from the first quarter and 8% year on year, courtesy of improved performance in the Oman plant as a result of fewer maintenance activities and higher pellet feed availability at the Vargem Grande plant.Copper production for the quarter was down 24% year over year to 55.9 kt in the quarter. Compared with the first quarter of 2022, copper output was down 1.2% due to planned and corrective maintenance at the Salobo plant that offset the impact of the Sossego SAG mill resumption in early June and stronger performance of Canadian mines. Vale sold 51.5 kt of copper, which reflects a 31% decline from the last-year quarter. However, compared with the first quarter of this year, copper sales were up 2.4% due to the postponement of a shipment.Vale has revised its copper production to 270-285 kt to account for the longer-than-expected maintenance at the Sossego mill and additional maintenance at the Salobo mill in the back half of the year.Production of nickel was down 16% year over year and 24% sequentially to 34.8 kt in April to June period. Scheduled maintenance of downstream facilities, partially offset by strong performance at Onça Puma, impacted production in the quarter.Nickel sales were down 17% year on year to 39.3 kt. However, on sequential comparison, sales were up 0.8%, outpacing production by 13%, as first-quarter inventories were sold in the second quarter.Cobalt production reached 541 metric tons in the quarter under review, down 28.2% from the prior-year quarter and 28.3% sequentially. Gold production plunged 37.5% year over year and 15.5% sequentially to 60,000 troy ounces in second-quarter 2022. Platinum production was 21,000 troy ounces, down 30% year on year and 8.7% sequentially. Palladium produced was 28,000 troy ounces, down 22% year on year and 3.4% sequentially.

Production Numbers from Peers

Last week, Rio Tinto Group RIO reported that its iron ore shipments in the second quarter of 2022 rose 5% year over year to 79.9 Mt. Iron ore production was up 4% year over year to 78.6 Mt. Despite the impact of higher-than-average rainfall in May, continued focus on mine pit health and commissioning of Gudai-Darri supported production during the quarter under discussion.The total iron ore shipped by Rio Tinto is 151.4 Mt for the first half of 2022, which reflects a 2% drop year over year. Iron production in the first half of this year was 150.3 Mt, 1% lower than the prior year. This was primarily due to the 6% decline reported in its first-quarter production to 71.7 Mt.BHP Group BHP recently reported that its iron ore production for the fiscal year ended June 30, 2022, was in line with the prior period at 253 Mt. Production in June ended quarter was 64.1 Mt, down 2% year on year but up 8% sequentially.BHP’s production came within its iron ore production guidance between 249 Mt and 259 Mt for fiscal 2022. Production for the 2023 financial year is expected to be between 249 Mt and 260 Mt

Price Performance

Shares of Vale have fallen 42.6% in a year compared with the industry’s decline of 41.2%

Zacks Investment Research

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Zacks Rank & a Stock to Consider

Vale currently sports a Zacks Rank #5 (Strong Sell).A better-ranked stock in the basic materials space is Albemarle Corporation ALB, which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Albemarle has a projected earnings growth rate of 231.7% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised upward by 26.5% in the past 60 days.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 20%. ALB has gained roughly 11% in a year.

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