Vale Cuts Iron Ore Pellet Output as Demand Drops and Supply Grows

Vale, the world’s top iron ore producer, has decided to lower its 2025 production target for iron ore pellets and similar products. The company now expects to produce between 31 and 35 million metric tons next year, down from its earlier forecast of 38 to 42 million tons.

Vale announced this change on July 2, 2025, after reviewing the current market situation. The main reason for this cut is that fewer customers want to buy the more expensive, higher-quality iron ore pellets.

At the same time, there are too many pellets available on the market. This oversupply has grown because Samarco, a company owned by Vale and BHP, is quickly increasing its own pellet production after recovering from a major accident in 2015.

By the end of 2024, Samarco expects to produce up to 15 million tons of pellets per year, adding even more to the global supply. To adjust to these changes, Vale will temporarily stop production at its pellet plant in São Luís, Brazil, for maintenance during the third quarter of 2025.

In 2024, this plant produced 2.6 million tons of pellets. While the plant is offline, Vale will sell the raw material—called pellet feed—as standard iron ore fines instead, which are currently in higher demand.

Vale Cuts Pellet Output as Steelmakers Shift to Cheaper Iron Ore

This shift comes as steelmakers, especially in China, are buying less of the premium pellets and more of the cheaper iron ore fines. This is because steel prices have fallen and profit margins are tighter, so companies want to save money where they can.

Using fines instead of pellets is less efficient, but it helps keep costs down. Vale’s financial results show the impact of these market changes. In 2024, the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) dropped 22% to $15.4 billion.

The main reasons were lower iron ore prices and a drop in sales. In the last quarter of 2024 alone, Vale’s EBITDA fell 40% compared to the same period the year before, as sales volumes fell by more than 9 million tons.

Vale’s decision to lower its pellet production shows how the company is adapting to a market with too much supply and weaker demand for high-quality iron ore.

For steelmakers, this may mean fewer pellets available in the short term. However, the bigger picture is that both miners and steel companies are being forced to find new ways to stay profitable as the market changes.

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