Brazilian iron ore producer Vale (VALE) said Thursday that it could reduce its expected iron ore production by up to 30 million tons during the next two years as it attempts to revive its margin amid an ongoing and severe commodity price decline.
An increase in capacity "enables us to close higher-cost and lower-quality production if necessary," said Vale Head of Ferrous Peter Poppinga on a conference call, according to Reuters. "The capacity will be there, 450 million tonnes, and we are going to use it according to market conditions."
Morgan Stanley said in a research note Monday that the global iron ore market will now look to Rio Tinto (RIO) for further updates.
Vale's move was significant, the firm said, because it marked "the first time the company had publicly recognized that a supply-side response was required. Competitive supply growth in this market appears to be ending. This creates upside risk for prices."
Iron ore hit a 10-year low at the start of April but rallied to have its largest monthly gain in two years.
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