As prices surge, Vale joins iron ore production guidance cuts

Top iron ore producer Vale followed rivals Rio Tinto and BHP Billiton  on Wednesday by announcing that it expects full-year iron ore production to come in at the lower end of guidance.

Vale  said it produced 77.5 million tonnes of iron ore in the first quarter, marking a record for output during the first three months of the year for the Rio de Janeiro-based company.

Its Carajás operations also achieved a production record for a first quarter of 32.4 million tonnes, representing an increase of nearly 18%, offsetting the halt in production at its Samarco 50-50 joint venture with BHP and the decrease in output at its Mariana mining hub. Operations at Samarco remains suspended following the failure of a tailings dam in November.

The company total output was down 12% from the December quarter however.

"Production in the first quarter and the plan for the rest of the year suggests an annual production towards the lower end of our original guidance of 340-350 million tonnes," Vale said in a statement. The company produced 345.9 million tonnes in 2015.

Rio won't hold the top spot for long – Vale’s flagship S11D project with annual capacity of more than 90 million tonnes is 80% complete

BHP today also cut its production forecast for the financial year ending June 30 by 10 million tonnes to 229 million tonnes. Quarter on quarter production declined by 7% due to bad weather.

Rio Tinto's global output showed double digit year-on-year gains in the first quarter of the year and said it remains on target to produced a record 350 million tonnes this year, but the Anglo-Australian giant did announce that its 2017 shipments would be lower by some 15 million tonnes.

While Rio could just pip Vale as the top iron ore miner this year on current predictions, the Melbourne-based company won't top the rankings for long. Vale’s flagship S11D project in the Carajas complex with annual capacity of more than 90 million tonnes is 80% complete and is expected to start shipping by the end of 2016.

The rally in the price of iron ore entered a new phase on Wednesday with the steelmaking raw material jumping to a 10-month high.

Northern China benchmark prices gained 4% to $64.30 per dry metric tonne (62% Fe CFR Tianjin port), the highest since mid-June according to data supplied by The Steel Index.

Iron ore is up 11.8% this week and the steelmaking raw material now boasts a near 50% rise year to date and an almost three-quarters surge from near-decade lows reached mid-December.

Iron ore price leaps to 10-month high