Vale Cuts Iron-Ore Production Guidance

RIO DE JANEIRO—Brazilian mining giant Vale SA on Tuesday cut its production guidance for iron ore by nearly 10% in 2016, as a global surplus of the steelmaking material continues to weigh on prices.

Vale, the world's largest iron-ore producer, now expects to mine between 340 million and 350 million metric tons of the commodity next year, compared with a previous forecast of 376 million tons, the company said in a presentation.

Last month's tailings-dam collapse at Samarco Mineraç ã o SA, a joint venture between Vale and Australia's BHP Billiton Ltd., is expected to dent Vale's 2016 production by some 17 million tons. The accident knocked out a conveyor belt at Vale's Fabrica Nova mine, shutting down 9 million tons of annual output, while Samarco is no longer expected to buy 8 million tons of iron ore from Vale due to authorities' revocation of its license.

Vale expects global iron-ore exports—known as the "seaborne" market—to reach some 1.6 billion tons in 2016. But the company sees demand at between 1.35 billion and 1.4 billion tons.

This market glut, combined with a strengthening U.S. dollar, has decimated prices for iron ore in recent quarters. The Steel Index's benchmark spot price fell to $42.80 per ton on Monday, down 40% from a year earlier and a fraction of the $100-per-ton floor that Vale and other mining companies once used for their long-term plans.

Vale's presentation on Monday suggested iron-ore prices would range between $48 and $52 per ton in 2016.

Write to Paul Kiernan at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

December 01, 2015 11:45 ET (16:45 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.