Brazil’s iron ore exports to China and Japan are falling despite the global increase in supply, according to official Brazilian statistics. The fall comes as some material from Vale struggles to compete against Australian material with Asian mills, importers tell Kallanish.

Brazil exported 14.7 million tonnes of ore to China in August 2104, down 12% year-on-year and 9% month-on-month, according to the Brazilian Ministry of Industry and Foreign Trade. August exports to Japan were also down 6% y-o-y to 2.45mt.

Official Chinese import data for July show that Brazil’s share of Chinese iron ore imports was at 17%, down from 22% in December 2013, while Australia’s share increased from 51% to 61% over the same period.

One Chinese ore importer tells Kallanish that while Vale’s Carajas fines have a strong market, it is struggling to sell ore from its south eastern mine network, which has been at a discount to Australian material with a similar Fe content. Vale will have to change its sales strategy in the fourth quarter, the source adds.

Vale launched a new product on 17 September, in part to increase sales of ore from its south eastern mine system. Sinter Feed Extra Blend (SFXB) is a mix of material from its northern and south eastern systems which is being blended at its new facility in Malaysia. The Blend has Fe content of 62.3% with a lower alumina content but higher silica content than PB fines and Newman fines, analysts say.

The Malaysian facility is core to Vale’s strategy to increase sales to China. It plans to lower freight costs by shipping large quantities to the plant with its Valemax 400,000 deadweight tonnage carriers and then blend at the site and sell on to Asian customers. The plant can blend 30 million tonnes/year of ore and could see capacity increased to 100m t/y.

Certainly Vale will have to find some solutions to its declining market share if it wants to achieve its target of 450m t/y of output by 2018. Of this 400m t/y would likely be exported and Vale concedes it would likely have to double exports to China, currently at around 150-160m t/y.