Brazilian iron ore producer thinks Chinese economy has stopped slowing and is increasing spending.
Companhia Vale Do Rio Doce believes the end of the downturn is in sight. The Brazilian iron ore producer plans to go on a spending spree in 2009 to align output and shipments with expected increased demand from China.
On Thursday, Companhia Vale Do Rio Doce (nyse: RIO - news - people ) Chief Executive Roger Agnelli told reporters in Brazil that China's economy has stopped weakening and the global economy may stop declining in the second quarter, according to TradeTheNews.com. Agnelli said that Vale plans to boost investment by 40.0, to $14.0 billion in 2009, up from $10.0 billion n 2008.
Vale slashed iron ore production in the fourth quarter as demand weakened, but Agnelli expects a rebound in the Brazilian and Chinese economies.
On Thursday, Vale signed a contract to build 15 new tugboats, 32 barges and two other vessels at a cost of $171.1 million to carry its iron ore. That's a turnaround from the fourth quarter, when it slashed production by 21.0 compared to the prior year. For 2008, production only fell 0.5 compared to 2007 because demand for iron ore stayed strong until the middle of 2008.
Vale said in a statement on Wednesday that it is aligning its production “with the new global economic outlook emerging from the financial market stress, which has caused a strong recessionary impact on the real economy.” The company said it has “acted proactively to cut back production.”
Vale shut down the higher-cost lower-quality output mines to keep production in line with expected demand in the short-term, the company said.
In October, Vale said it planned to reduce output by 30.0 million tons a year (See “Vale’s Tears”). Last year, it produced 296.0 million tons of iron ore, which accounted for about 55.0 of its total revenues.
In early December, Vale announced it was slashing 1,300 jobs and putting 5,500 workers on paid leave. In mid-December, Agnelli said he could not rule out more job cuts.

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