(Bloomberg) -- Vale SA’s next chief executive officer has been tasked with maximizing iron ore output to boost efficiencies at the Brazilian mining giant despite China’s fading appetite for the steelmaking ingredient.
“The company’s main objective is production,” Chairman Daniel Stieler said Tuesday in an interview at the company’s headquarters in Rio de Janeiro. “When you improve production, your cost and project management automatically adjust.”
Stieler underscored the directive for incoming CEO Gustavo Pimenta, the finance chief who was named Monday as the next top executive for the world’s No. 2 iron ore producer. Pimenta’s main short-term goal when he takes over Jan. 1 will be delivering high-grade iron ore to the global steel industry. Vale aims to be the main provider of quality ore that steel mills need to cut greenhouse gas emissions.
It’s an objective Pimenta pitched to the board during the CEO selection process, according to the chairman. The 46-year-old executive has been appointed in a period when iron ore prices are slumping due in part to weakness in Chinese steel demand.
The slowdown in China — a top iron-ore consumer — comes as a new generation of large, low-cost mines in Australia and Africa start production and large miners boost output in an already oversupplied market.
Iron ore futures have fallen nearly 30% this year and are hovering around $100 a metric ton — less than half the record levels seen in 2021.
Vale was once the world’s top iron ore supplier, but lost that title to Rio Tinto Group following a 2019 mining disaster that forced the company to halt production at many of its mines in southeast Brazil.
Pimenta’s appointment ended a messy succession process that had dragged on for months. The leadership search created uncertainty for investors and raised the prospect of renewed political interference in one of Brazil’s biggest companies after President Luiz Inacio Lula da Silva earlier pushed for a key ally to get the job. The appointment of a company insider has been seen as positive by investors, reaffirming the board’s independence.
Restoring government relations is also on Pimenta’s to-do list, Stieler said. While Vale was privatized in 1997, its relationship with local authorities remains a critical factor in acquiring environmental licenses that it needs to expand iron ore production. The company is also seeking to negotiate a settlement with authorities over a deadly mining disaster in 2015.
Vale chose Pimenta in particular for his ability to communicate with key stakeholders, said Stieler, who runs Vale’s board as a nominee of Previ — the pension fund of Banco do Brasil SA. The state-controlled bank is Vale’s biggest individual shareholder, with an 8.7% stake.
“Vale has a reputation issue that needs to be reestablished, to show society its value,” Stieler said. “The communication process is very important.”
The company’s priorities in the coming months also include reaching a final settlement over compensation for a 2015 tailings dam collapse, as well as resolving a dispute with the government over the renewal of a concession for a railway that transports ore from Vale’s most important operations.
Vale remains focused on iron ore as its key business, Stieler said, though the company remains open to partnerships and expansion into different regions and minerals, including copper.
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