Vale to set carbon emissions targets for customers

Brazil’s Vale will join BHP in setting carbon emissions targets for its customers,

The ore carrier Vale Beijing is towed away from the Ponta da Madeira terminal, in Sao Luiz, northern Brazil. Picture: AFP

Brazil’s Vale will join BHP in setting carbon emissions targets for its customers, unveiling the move in an investor presentation in New York on Monday night, as the iron ore major plots a path to recovery from a horror year.

Vale’s chief financial officer, Luciano Siani, told investors and analysts the company would move towards setting so-called scope 3 targets, aimed at limiting carbon emissions for customers of its iron ore as well as for its transport, and step up attempts to power its own operations solely from renewable sources by 2030.

The move brings Vale into line with BHP, which became the first major miner to announce it would set public targets for its own scope 3 emissions earlier this year, leaving Rio Tinto — which has resisted the push, saying it was too difficult to control what its customers did with its products — looking increasingly isolated amid rising pressure from shareholder activists and environmentally minded fund managers.

BHP is yet to define its scope 3 targets, but outgoing chief executive Andrew Mackenzie announced the establishment of a $US400m ($584m) fund to assist its customers’ research and implement carbon reduction technology as part of BHP’s commitment to set emissions targets for its products downstream.

Mr Siani admitted Vale’s new targets were “ambitious” but said the company intended to have net zero carbon emissions by 2050, a goal shared by BHP, and would bring its interim targets into line with the goals of the Paris climate agreement in the meantime.

But Mr Siani also confirmed it could take the iron ore major up to three years for its operations to recover from the tailings dam collapse early this year that shuttered a number of its mines and cut more than 83 million tonnes from global iron ore markets, sending the commodity price surging in the first half of the year.

Vale shipped 385 million tonnes of iron ore in 2018, and said it is unlikely to return to those levels until at least 2021, with production growth not expected until 2022. It expects sales of 307-312 million tonnes in 2019, and 340-355 million tonnes in 2020, before rising to 375-395 million in 2021.

RBC Capital Markets’ London mining analyst Tyler Broda said the new Vale guidance was likely to support iron ore prices in the medium term, saying spot prices of the commodity could touch $US100/t again in a “Santa rally”, or early in the New Year.

“There is a consistent historical rally in iron ore prices from December through February — with a cumulative average 10 per cent move before the softening in March-through May,” Mr Broda said in a note to clients on Tuesday.

“Our analysis suggests the usual Q4/Q1 seasonal strength in iron ore is likely to be exacerbated over the coming months by low Chinese steel inventories and only partially recovered tonnages from Vale. We think iron ore should challenge $100/t again before the reality of a slowing China takes hold with the property market showing significant signs of running out of steam next year.”