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Demand
for iron ore remained strong in the Chinese market, with a total crude
steel production of 233.7 Mt, according to the World Steel Association,
representing an increase of 1.4% when compared to 1Q19. Crude steel
production was higher in the first two months of the year, supported by
demand from the construction and infrastructure sectors.
This
scenario, added to the low stocks of imported ore in China, and the
restrictions on Chinese domestic ore supply due to COVID-19, kept demand
for ore steady during the quarter.
The
average iron ore market reference price for 62% Fe in the 1Q20 was
US$89.00/t, stable in relation to that in the 4Q19 (US$88.6/t) and 7.6%
higher compared to the same period in the previous year (1Q19:
US$82.7/t).
The
premium for higher quality ores registered an increase as consequence of
lower supply of the domestic concentrate and the declining trend in
ocean freight, due to lower demand for cargo on the Tubarão-Qingdao
route and the decrease in oil prices.
In the
1Q20, production volume was 2.2 million tons, a 5.6% increase over that
in the 4Q19 (2.0 million tons), mainly due to the negative impact of
programmed preventive maintenance at the Samambaia Plant in the 4Q19.
Sales volume was 2.2 million tons in the 1Q20, an 11.3% decrease in
relation to the 4Q19 (2.5 million tons), due to the conclusion of
inventories adjustment.
Production and sales volumes are shown below:
Iron Ore
|
Thousand tons |
1Q20 |
4Q19 |
1Q19 |
Change |
|
1Q20/4Q19 |
1Q20/1Q19 |
|
Production |
2,159 |
2,044 |
1,337 |
5.60% |
61.50% |
|
Sales
to Usiminas |
604 |
544 |
612 |
11.00% |
-1.30% |
|
Sales
- Third Parties - Domestic Market |
173 |
244 |
416 |
-29.10% |
-58.40% |
|
Sales
- Exports |
1,436 |
1,707 |
868 |
-15.90% |
65.40% |
|
Total Sales |
2,213 |
2,495 |
1,896 |
-11.30% |
16.70% |
In the 1Q20,
distribution by commercial condition was 72% of exports in CFR (Cost and
freight) and 28% FOB (Free on Board), against 59% and 41% in 4Q19,
respectively.
Comments on the Business Unit Results - Mining
Net
revenue reached R$581 million in the 1Q20, stable in relation to the
4Q19 (R$575 million), mainly due to the growing average depreciation of
the Real against the Dollar, partially compensated by lower sales volume
in the quarter.
Total
cash cost per ton was R$62.8/t in the 1Q20 against R$47,0/t in the 4Q19,
variation mainly explained by the punctual event occurred in the 4Q19 of
renegotiation of a third-party area leasing contract, which enabled the
reversion of costs from previous quarters in the last quarter of 2019.
Excluding expenses with temporarily idle plants and the above-mentioned
effect of leasing renegotiation, cash cost of production was R$61.0/t in
the 1Q20 (R$63.2/t in the 4Q19), a 3.5% decrease between periods, mainly
due to lower spending with maintenance materials and electrical energy.
Cost of
goods sold (COGS) in the 1Q20 was R$335 million, 9.5% lower than in the
4Q19 (R$371 million), mainly due to lower sales volume in the period. In
unitary terms, COGS/t in the 1Q20 was R$151.4/t, 2.1% higher over that
in the 4Q19 (R$148.3/t).
In the
1Q20, net operating income (expenses) presented a negative result of
R$68 million when compared to that in the 4Q19, in the amount of a
negative R$37 million, mainly due to the event occurred in the 4Q19
(renegotiation of a third-party area leasing contract).
Adjusted EBITDA reached R$214 million in the 1Q20, stable in relation to
that in the 4Q19 (R$209 million). Adjusted EBITDA margin was 36.8% in
the 1Q20 (4Q19: 36.4%).
Investments (CAPEX)
CAPEX
totaled R$34 million in the 1Q20 (4Q19 of R$65 million). Investments
were mainly applied to safety, environment and sustaining CAPEX. |
