KEY POINTS
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Vale says extraordinary dividends are unlikely in 2026 after third-quarter core profit fell 20%.
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Around 160 million tons of global seaborne iron ore supply could face cuts because of unprofitable operations.
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Vale has secured more than 80% of its 2027 freight needs and hedged 67% of next year’s bunker fuel consumption.
Brazilian mining giant Vale is unlikely to pay extraordinary dividends in 2026 as weaker iron ore prices, rising fuel and freight costs, and geopolitical uncertainty put pressure on its earnings.
Chief Financial Officer Marcelo Bacci said the company would rather preserve cash and limit debt, although Vale also considers share buybacks attractive given its current share price.
The comments followed a 20% year-on-year decline in Vale’s third-quarter core profit.
Vale prioritises cash and debt management
Bacci said geopolitical uncertainty had encouraged Vale to maintain a stronger cash position and reduce its debt exposure rather than make additional dividend payments.
The company is also considering share buybacks, which the CFO described as appealing because he believes its shares are undervalued.
Vale does not currently see major merger and acquisition opportunities, but executives said the company would continue monitoring potential deals that could become relatively inexpensive.
The approach suggests Vale is prioritising financial flexibility amid uncertain market conditions.
Freight costs and fuel supplies remain key concerns
Chief Executive Officer Gustavo Pimenta said Vale had secured all its freight requirements for the fourth quarter of 2026 and had already covered more than 80% of its anticipated freight needs for 2027.
The company has also hedged 67% of its expected bunker fuel consumption for next year, helping to manage exposure to potential price fluctuations.
Elevated fuel and freight expenses contributed to the pressure on Vale’s third-quarter core profit, alongside lower iron ore prices.
High-cost iron ore supply faces potential cuts
Pimenta said approximately 160 million metric tons of global seaborne iron ore supply, equivalent to around 10% of the total, was effectively operating at a loss.
Some of this supply could be reduced or shut down if market conditions remain unfavourable, he said.
Vale itself has about five million tons of third-party supply and its own production potentially at risk of going offline, according to the CEO.
Any significant production cuts across the industry could affect global iron ore availability, depending on how market conditions develop.
Vale maintains 2026 production outlook
Despite the pressure on earnings, Vale remains on track to meet its 2026 production guidance across its portfolio.
The company also expects its capital expenditure and all-in copper production costs to finish the year near the lower ends of their respective guidance ranges.
These expectations indicate that Vale anticipates maintaining its operational targets and controlling costs even as weaker iron ore prices and higher logistics expenses weigh on profitability.
