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."

That didn't happen in the first quarter. Vale set a record for iron-ore production but sold it at roughly half of last year's prices, contributing to a substantial deterioration of profit margins. Earnings before interest, taxes, depreciation and amortization, or Ebitda, plummeted 61% from the first quarter of 2014 to $1.6 billion, as net revenues declined 34% to $6.24 billion.

Mr. Poppinga said Vale would be most likely to start cutting output at its complexes in the southeastern Brazilian state of Minas Gerais, where decades of extraction have left mines depleted of high-grade ore. The company plans to gradually substitute this with output from the Carajás region, home to perhaps the world's largest remaining deposit of top-quality iron ore.

While it may be the biggest, Vale is not the first big iron-ore producer to waver amid the downturn in prices. BHP Billiton said last week it was "deferring" a port project needed to increase its production capacity to 290 million tons a year.

Write to Paul Kiernan at paul.kiernan@wsj.com

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