Company remains committed to capacity growth, but may freeze some higher-cost production
RIO DE JANEIRO—The world’s largest iron-ore producer gave the strongest signals yet Thursday that it could temper output in the face of an oversupplied global market.
Peter Poppinga, head of the ferrous division at Brazil’s Vale SA, said that while the company remains committed to increasing its annual iron-ore capacity to 450 million metric tons in a few years from around 350 million tons now, it may idle up to 30 million tons of higher-cost production. He reiterated that the strategy was “new” and came in addition to an existing plan to buy less ore from third parties.
Vale and fellow iron-ore majors Rio Tinto PLC and BHP Billiton PLC have been criticized by smaller rivals and many analysts in recent months for increasing their output of the steelmaking ingredient despite stagnating demand from China, the world’s main market. Together the three companies account for some 60% of global iron-ore exports, and all have continued to invest in new supply even as prices collapsed in recent months.
The Brazilian company has faced heat for plowing ahead with a particularly costly, $16.4 billion expansion of its Carajás mining complex in the Brazilian Amazon. Company executives on Thursday again brushed aside suggestions that they might stretch out the project’s timeline.
“I would like for us to differentiate between having a certain capacity and utilizing it,” Mr. Poppinga said in a conference call with analysts. “We can now optimize our operations. That makes it possible to paralyze some higher-cost, lower-quality production flows in these systems, obviously depending on market conditions and consistently pursuing our objective of margin optimization.”
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