Boost from Low Bunker Prices Less Than Expected as Vale Posts $3.1 Billion Net Loss

the boost from low bunker prices on value's result was less then expected

Lower bunker prices and record iron ore production were not enough to prevent Vale S.A. from reporting a net loss of $3.1 billion in its first quarter of 2015.

This is the third straight quarterly loss for the world's biggest iron ore producer, and comes on the back of falling commodity prices and slowing demand from China.

While falling bunker prices had some positive impact on the result, Reuters reported it was less than some analysts had expected due to a number of factors.

Vale said it's bunker hedging program cost it about $2.3 per metric tonne (pmt) meaning freight costs fell just $2.2 pmt compared with $19.5 pmt in the previous quarter.

In addition, Vale said falling oil prices had a limited positive impact on its fuel costs "since prices of diesel in Brazil are not directly correlated to international oil prices."

Nevertheless, the firm said the reduction in bunker prices positively impacted its Q1 2015 prices by $2.9 pmt compared to $2.4 pmt in the fourth quarter of 2014.

Vale also credited lower bunker prices along with lower sales volumes and charter freight rates for a $409 million decrease in maritime freight costs to $628 million in Q1 2015 compared to Q4 2014.

Falling bunker prices was cited again as a reason for a $4.5 pmt decrease in unit freight cost per iron ore metric tonne compared to Q4 2014.

Vale explains its $3.1 billion net loss as "mainly driven by the non-cash impact stemming from the 20.8 percent quarter-on-quarter depreciation of the Brazilian Real against the US dollar."

Vale's iron ore production for Q1 2015 of 27.5 Mt was achieved at its Carajás operation, a new record for a first quarter.

Vale's gross revenues reached $6.3 billion in Q1 2015, a decrease of $2.8 billion compared to the same time period last year.

Last November Beijing government's Ministry of Transport ordered Chinese ports to strictly monitor the entry of Vale S.A.'s Valemaxes, after banning the carriers in 2011.