Top iron ore producer Vale followed rivals Rio Tinto and BHP Billiton on Wednesday by announcing that it expects full-year iron ore production to come in at the lower end of guidance.

Vale  said it produced 77.5 million tonnes of iron ore in the first quarter, marking a record for output during the first three months of the year for the Rio de Janeiro-based company.

Its Carajás operations also achieved a production record for a first quarter of 32.4 million tonnes, representing an increase of nearly 18%, offsetting the halt in production at its Samarco 50-50 joint venture with BHP and the decrease in output at its Mariana mining hub. Operations at Samarco remains suspended following the failure of a tailings dam in November.

The company total output was down 12% from the December quarter however.

"Production in the first quarter and the plan for the rest of the year suggests an annual production towards the lower end of our original guidance of 340-350 million tonnes," Vale said in a statement. The company produced 345.9 million tonnes in 2015.

Eoin Treacy's view

On the supply side, the reductions in production announced by the iron-ore oligarchy of BHP Billiton, Rio Tinto and Vale may be transient in nature. In the first two cases they are the result of infrastructure upgrades and for Vale it is a case of the Samarco dam break accident leading to the mine being closed. The demand side of the equation on the other hand may be more important.

China’s steel mills are ramping up production in a play to out produce global competitors. This is sure to lead to dumping allegations in the coming months but that is a less important factor right now as demand for iron-ore and coking coal pick up. This article from Reuters carries more details. Here is a section: 

While China has engineered some steel capacity cuts, its efforts risk being undermined by a sharp rise in domestic steel prices that has seen mills ramp up output. Even "zombie" mills, which had stopped production but were not closed down, have been resurrected.

Chinese steel prices SRBcv1 have risen by 77 percent so far this year, as supplies tightened following plant shutdowns last year, consumers restocked and seasonal demand picked up.

On Thursday, steel futures in China jumped nearly 9 percent to their highest since September 2014. The price of rebar used in construction for October delivery on the Shanghai Futures Exchange rose to as much as 2,787 yuan ($430) a tonne. Iron ore futures on the Dalian Commodity Exchange also rose to 19-month highs.

Iron-ore prices found support in the region of the MA from March and a clear downward dynamic would be required to question medium-term scope for additional upside.

Clicking through the iron-ore miners section of the Chart Library the majority of companies share this chart pattern.