Darren Kugler
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Darren Kugler in Commodities,

Vale Iron-Ore Output Rises More Than Forecast to Record

Vale SA (VALE), the world’s largest iron-ore producer, exceeded analysts’ estimates to post record quarterly output as new projects start, deepening a supply glut that saw the steelmaking ingredient trade at five-year lows.

Iron-ore output excluding production from its share in the Samarco Mineracao SA venture climbed 3.1 percent to 85.7 million metric tons from 83.1 million tons a year ago, the company said in astatement. That beat the 83.3 million-ton average of seven analysts’ estimates compiled by Bloomberg. Vale’s copper and nickel output also exceeded forecasts.

Expansions at the Rio de Janeiro-based company and its two main competitors BHP Billiton Ltd. andRio Tinto Group are creating a global surplus in the seaborne iron-ore market that UBS AG estimates will reach 26 million tons this year. Prices have plunged 40 percent in 2014 to near five-year lows. Vale is on course to produce as much as 330 million tons this year, above its target, according to Quantitas Asset Management.

“Vale’s logic is to produce as much as possible because they earn money anyway thanks to lower cash costs,” Marcel Kussaba, an equity analyst at Quantitas, which oversees 16.6 billion reais ($6.6 billion) including Vale shares, said by telephone from Porto Alegre, Brazil. “It’s a good result but only confirms the trend we already saw in the second quarter.”