uploads///Coal

Stoppages Impacted Vale’s Coal and Fertilizer Production in 1Q16

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May. 6 2016, Updated 1:04 p.m. ET

Coal production

Vale’s (VALE) coal production for 1Q16 fell by 2% year-over-year (or YoY) while it rose by 5% quarter-over-quarter to reach 1.7 million tons.

Vale’s Carborough Downs in Australia reached its second-highest quarterly output at 763,000 tons in 1Q16, driven by good operational performance. This helped the company to offset lower production at its Moatize operation. Production at Moatize was 90,000 tons in 1Q16 as both metallurgical and thermal coal production fell due to unplanned six-day maintenance and the prioritization of waste movement during the quarter.

Vale’s peers in the coal space are also suffering due to increased supply coupled with weak demand. This has led many coal stocks in the United States (QQQ) to file for bankruptcy.

Other coal producers (KOL) such as Peabody Energy (BTU), Arch Coal (ACI), and Cloud Peak Energy (CLD) are working to reduce costs to weather this downturn. Cloud Peak forms 3.0% of the SPDR Metals and Mining ETF (XME).

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Fertilizer output impacted by stoppages

Vale’s potash output fell by 19.4% quarter-over-quarter due to a six-day unscheduled maintenance stoppage at its beneficiation plant in 1Q16. The company’s phosphate production was 1.6 million tons, a fall of 24% quarter-over-quarter and 19% YoY.

The reduced production was due to lower production at Vale’s Brazil and Peru facilities due to scheduled maintenance stoppages and ship loading interruptions resulting from bad weather conditions.

Vale’s ammonia production was 26,000 tons in 1Q16, 344% higher than in 4Q15 due to a production restart after a prolonged maintenance stoppage at the company’s Cubatão plant.

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