00:00How exposed are your clients to the Middle East to this conflict? And are you having to adjust shipments or
00:06supply chains as a result?
00:08Today about 60 percent of our volumes go to China and we have an important part of our volumes going
00:14also to Europe.
00:15Middle East is an important region for us, but in terms of volume, it's not too relevant to affect the
00:21results of the company.
00:22Talk to me a little bit about, you know, your quarter was very strong operationally. You did have some headwinds
00:29added to the financial performance.
00:31What should investors focus going forward?
00:34I think we had a quarter where cost went up, but we have a very balanced market in the R
00:42&R industry, which means that as a consequence of cost going up industry wide, prices also went up.
00:48So the margins were preserved. So it was a quarter that we showed a lot of resilience and a lot
00:54of, you know, robustness in our operations.
00:58So I think going forward, it's important to monitor what happens in the industry as a whole in terms of
01:04cost changes as a consequence, especially of oil prices, which are important for us.
01:09And what happens with the price, on the other hand. So we are very confident because in the main markets
01:15that we have, notably China, the market is very robust.
01:20So we see, you know, the coming quarters in a positive way.
01:24Is there anything I mean, when it comes to costs, is there anything that you could have foreseen? Why did
01:29costs go up by so much?
01:30We actually we've we had a view that the prices or costs could go up as a consequence of oil
01:38prices.
01:38We have the shipping fuel important for us, diesel and the domestic transportation also important for us.
01:46So we took some measures in terms of hedging our position back a few months ago that are paying off
01:52very nicely and reducing the impact of what we see today.
01:55I mean, this is also partly due to the stronger Brazilian real. As you say, it's also, you know, freight
02:01rates and, of course, diesel prices.
02:03So how and why are you so confident that you can still stick to your annual guidance?
02:08I think, you know, from the demand point of view, we see a very strong market.
02:13And when you see supply and demand in iron ore, you see a very balanced market.
02:18So when you have an industry wide effect on costs in a situation like that, the prices respond, which is
02:24what we're seeing.
02:25Prices were about one hundred dollars before the war started.
02:29They moved up to one hundred and eight, one hundred and nine, which is where they are today, which is
02:33more or less the same percentage that costs also went up.
02:36So to the extent that the market continues to be balanced and that the demand is there, we are not
02:42too concerned about the results.
02:44Of course, the costs are going up. We have to fight against the cost every day.
02:48But we are positive and confident about the margins.
02:52So you're hinting at special dividends and more buybacks.
02:57When will you when will you go for it?
02:59That's a decision for the second quarter, for the second half of this year.
03:04We started the year with a very nice and positive cash flow, better than we expected, as a consequence of
03:10these market dynamics that I just mentioned.
03:13So to the extent that we continue to generate more cash and we have, you know, a CapEx program, which
03:20is already very large, about close to six billion dollars of CapEx this year, that is not going to change
03:26much.
03:26So the additional cash that we generate normally will be diverted to the shareholders in the form of dividends or
03:34buybacks.
03:34And we're going to choose between the two, depending on market conditions.
03:38But that's something for the second quarter that you'll decide in the second half of the year.
03:42Second half is the decision. Yes.
03:44How would you describe the situation in China when it comes to demand, real demand for iron ore?
03:49Very robust.
03:50OK.
03:51In China, more recently, we saw an important change in where the demand was coming from.
03:58The real estate sector was very important for us and continues to be very important.
04:02But there was a very sharp decline in the construction in China, which is a heavy user of iron ore,
04:09of steel and therefore iron ore.
04:12But on the other hand, the exports increased and also the domestic consumption of consumer goods, especially durable goods like
04:19cars, refrigerators and other things also is picking up.
04:22So there was a change in the composition of the demand, but the total demand continues to be very robust.
04:28And that is for the rest of 2026 as well?
04:31Yes.
04:31Yes.
04:32We had a very strong first quarter.
04:34We see demand very, very good in China.
04:36India growing very nicely and also the Southeast Asia.
04:42Europe is weaker, but that's a continuation of a trend that we've been seeing in the last months.
04:48I mean, there are many question marks, of course, about what happens in Iran.
04:51If it stays like this and there's no real peace solution or even if there is some kind of agreement
04:56in the short term, what does it mean for global demand of iron ore?
05:00I think for global demand, the main concern is a long war that could lead to a destruction of demand
05:07as a consequence of high costs and therefore high prices.
05:11That's the main concern that we have today.
05:13But if we continue in the trend that we have today, things are normal.
05:18But we have to be careful about the length of the war.
05:22I understand also that China has been pushing for much more influence when it comes to iron ore pricing through
05:29CMRG.
05:30I mean, is that changing the balance of power and the dynamics and how is Vale responding?
05:36Yeah, we have a very positive relationship with CMRG.
05:39We move an important part of our volumes through them to the final clients.
05:45It's always, you know, the normal dispute between buyers and sellers.
05:50Both sides, they want better conditions.
05:52But the relationship has been very positive.
05:56We have, you know, we've been selling to China for decades.
06:00I don't think there's going to be any disruption in that kind of relationship.
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