Brazilian mining giant Vale has hiked its iron ore production guidance by 3% to 4% in a move that is sure to be welcome demand-side news for the capesize bulker sector.
The Rio de Janeiro-based company, whose iron ore volumes power the benchmark Brazil to China capesize route, said it now expects to produce 323m to 330m tonnes in 2024.
That adds 13m tonnes to the lower limit and 10m tonnes to the upper threshold of its last production guidance in July, when it said it would produce 310m to 320m tonnes this year.
Vale revealed the higher outlook after completing early a project that should boost production.
The company said on Wednesday that it started commissioning wet processing operations at its Vargem Grande 1 project, which would allow it to resume 15m tonnes per annum of iron ore output at the mining complex in the Brazilian state of Minas Gerais.
The plant had been operating with natural moisture since 2019, due to a lack of water capture and disposal as a nearby dam was taken out of commission. The company is working to eliminate dams across its system.
Vale has been working to adjust the water systems at the facility to bring a 2% quality improvement to its iron ore output.
“Vargem Grande 1 was completed within budget and with the commissioning starting one month ahead of schedule,” it said.
“The project represents an important step towards the iron ore production guidance of 340m to 360m tonnes in 2026, resulting in an improvement of the product portfolio quality, greater production capacity and greater operational flexibility.”
The higher guidance from Vale comes amid a tightening market on the capesize Brazil to China route, where round voyage earnings rose to $27,915 per day on Wednesday. That is up from $19,650 per day at the beginning of August and the highest level since early July.
Signal Ocean analyst Maria Bertzeletou wrote on Wednesday that a decreasing number of capesizes in ballast in the South Atlantic reinforces signs that the C3 route, which tracks the one-way freight rates on the Brazil to China trade, is rebounding.
“This suggests that supply dynamics in the region are starting to tighten, providing support for stronger rates as vessel availability diminishes,” she wrote in a note to clients.
“The combination of fewer ballasters and improved cargo flow of shipments from key markets like Brazil to China has likely contributed to the upward momentum in the C3 rates, signalling a potential shift towards a more favourable freight environment for owners.”
Futures in the capesize market were moving upward after the Vale announcement. October contracts on the 5TC route basket rose $679 to $29,900 per day, according to data from Braemar Atlantic Securities.
In the minor bulks, Vale expects to produce 153,000 to 168,000 tonnes of nickel.
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