SAO PAULO – Brazilian miner Vale on Tuesday cut its 2022 iron-ore production forecast due to the sale of its Center-West system assets, supply chain restrictions in its Northern system and the impact of lower market prices.

Vale, one of the world's largest miners, now expects iron ore output for the year to be between 310-million tonnes and 320-million tonnes, down from a previous estimate of 320-million tonnes to 335-million tonnes.

The drop partially reflects Vale's April agreement to sell its manganese and iron-ore mines in central Brazil, with an enterprise value of about $1.2-billion, to holding company J&F Investimentos. 

But the miner said the reduction was also "to account for greater flexibility in our production due to current market conditions", as iron ore prices retreat from 2021 highs in light of risks of lower demand from major buyer China.

"Vale recorded a quarter with numbers that mostly disappointed our forecasts," said Ativa Investimentos analyst Ilan Arbetman, adding that most of the downside was already reflected in Vale shares, which are down some 20% since the beginning of June.

The company also slashed its 2022 copper production estimate to 270 000 t to 285 000 t due to a longer-than-expected maintenance at one of its sites, and a separate scheduled maintenance at another. The previous forecast was 330 000 t to 355 000 t.

Second-quarter iron ore production was 74.11-million tonnes, slightly down from the 75.68-million tonnes a year earlier. However, output in Vale's key Northern system fell 10.2% to 39.07-million tonnes, amid supply chain restrictions.

Nickel production for the three months ended in June 30 fell 16.1% to 34 800 t, while copper output came in at 55 900 t, 23.9% below the previous year.

Analysts at Citi said production figures were mostly in line with the market expectations for iron ore, but weaker for Vale's base metals business - comprising nickel and copper.

"We expect Vale's stock to underperform tomorrow - the market is primed for weak results but maybe not this weak in base metals," Citi said in a note to clients.