Brazil's Vale Risks Mkt Share Loss From Canada Nickel Strike
Last update: 8/3/2009 3:21:46 PM
By John Kolodziejski
Of DOW JONES NEWSWIRES
RIO DE JANEIRO (Dow Jones)--A Canadian nickel miners strike could place Brazilian-owned Vale Inco in a delicate position, exposing it to loss of market share just as world demand recovers for the metal.
Vale Inco, a wholly owned subsidiary of sprawling Brazilian miner Vale SA (VALE), now has 3,420 workers on strike after the Voisey Bay unit downed tools Saturday, the company said Monday.
A former Vale executive, who wished to remain anonymous, said the company has been cutting back nickel mining since last year, which had pushed the price up.
"On the one hand, this is good because Vale gets a better price, but on the other, Vale may lose market share if the strike is prolonged," he said.
"The main point is that Vale is trying to cut high costs and benefits in North America to the level of the rest of the world, but this is complicated because the unions are strong there," he said.
"The strike could last a long time, and there are signs nickel inventories will decline as demand picks up in the third quarter," he added.
According to Vale Inco, the strike now affects units in Ontario, Newfoundland and Labrador.
United Steelworkers, or USW, representative Wayne Fraser said Vale hasn't agreed to any meetings since July 5.
Workers at Vale Inco's Sudbury complex in Ontario walked out on July 13 after failing to reach agreement on a revised three-year labor contract. The Sudbury mine was undergoing a maintenance outage at the time the strike began and was due on-line July 27. The issues include a reformed pension scheme with greater labor contributions, a higher ceiling before production bonuses are paid, as well as cuts in cost-of-living allowances.
UFW's Fraser has said the strike could last months.
Meanwhile, nickel prices rose 4.9% Monday to $18,835 per metric ton, their highest level this year.
Vale's nickel sales grew in price and volume in the second quarter, Chief Financial Officer Fabio Barbosa said last week, and he saw more space for growth ahead. Barbosa said there were signs of life for nickel demand, not only in China, but also in developed economies, and that 70% of nickel demand was outside of China.
Vale noted rising demand from stainless steel, batteries and the auto industry.
Vale's nickel sales were halved in the second quarter, bringing in $916 million, compared to $1.87 billion a year ago, the company reported last Wednesday.
However, nickel sales were sharply higher than the first quarter's $639 million, owing to a 22.7% average price rise, Vale said.
Vale is continuing to restructure and optimize its global nickel operations, Jose Carlos Martins, head of ferrous minerals and metals, said last week.
Until the beginning of the year, Vale's nickel business units, operated by Vale Inco, were working too independently, he added.
He also said that, among other measures, Vale Inco would reduce costs by diversifying its suppliers. Martins said there has already been a cut of 20% in Vale Inco's management personnel.
-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086; John.Kolodziejski@dowjones.com
(END) Dow Jones Newswires
August 03, 2009 15:21 ET (19:21 GMT)