VALE Vale SA

By Paul Kiernan 

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 Mineração 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 paul.kiernan@wsj.com

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(END) Dow Jones Newswires

December 01, 2015 11:19 ET (16:19 GMT)

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