Vale earnings disappointed by rising costs

Vale SA reported lower-than-expected earnings as the world's No. 2 iron ore producer grappled with falling steelmaking raw material prices at a time of rising energy and transportation costs.

Adjusted earnings before items totaled $6.94 billion in the third quarter, the Rio de Janeiro-based company reported. That beat the result a year ago, but fell from the second quarter and followed the average estimate of $8.83 billion.

Iron ore miners are returning to the world, after recovering economies posted higher prices and profits earlier this year. Futures, freight and bunker oil prices have fallen nearly 50% since mid-July as China cuts steel production to limit pollution and energy use, with costs rising. Vale is starting to curb its low-grade ore supply to maintain margins.

Still, the average third-quarter iron ore price remained above prior-year levels, helping net income rise 34% to $3.89 billion. In addition, Vale announced a new program to buy back up to 200 million shares worth $2.6 billion at current prices. This follows the repurchase of nearly all shares in the 270 million program.

Vale's shares in Sao Paulo are down 16% this year, in line with the peer-to-peer average. Its New York-traded shares were little changed after Thursday's close.