Brazilian miner Vale estimates that higher energy and freight costs linked to the Middle East conflict have left approximately 10 percent of global seaborne iron ore supply operating at a loss, potentially supporting a price recovery as high-cost producers reduce output, CEO Gustavo Pimenta stated in an interview with Bloomberg on October 16.
Around 160 million mt of supply operating at a loss
According to Pimenta, approximately 160 million mt of annual supply is currently unprofitable, while around 15 million mt has already been withdrawn from the market because of rising costs. He indicated that current prices should be somewhat higher to reflect increased freight rates and fuel expenses, with further production cuts expected to help rebalance the market, although the timing of a recovery remains uncertain.
Weak Chinese demand and new supply pressure prices
Singapore iron ore futures fell below $90/mt during the week of October 16, reaching their lowest level in two years and bringing their decline since the beginning of 2026 to approximately 15 percent. Weak Chinese demand and abundant global supply, including additional volumes from Guinea's Simandou mine, have weighed on prices, intensifying the pressure on producers facing higher operating expenses. Despite these conditions, Pimenta expressed confidence in Chinese demand.
Vale's results also reflect higher freight expenses
The cost pressures were also evident in Vale's second-quarter results, as previously reported by SteelOrbis, with its iron ore all-in costs increasing by 18 percent year on year to $61.6/mt, partly reflecting higher freight prices. Meanwhile, its C1 cash costs, excluding third-party purchases, rose by nine percent to $24.1/mt, mainly due to the appreciation of the Brazilian real.
Vale revised its 2026 guidance for C1 cash costs to $22.5-23.5/mt and all-in costs to $58-62/mt, largely reflecting the stronger currency and higher oil price assumptions.
