The four largest seaborne iron ore producers continue to operate at high capacity despite the 15% price decline from March levels. The Big 4 have C1 cash costs of $18-25/mt, offering substantial margins even at $100/mt. At current prices, the majors generate approximately $75-80/mt in gross margin per tonne, well above the reinvestment threshold.
Rio Tinto's Pilbara operations shipped 87 million tonnes in Q2, in line with guidance. BHP's Western Australia Iron Ore output reached 72 million tonnes. Vale's S11D mine in Brazil produced 48 million tonnes, recovering from Q1 production issues. FMG's output was 81 million tonnes, supported by the Iron Bridge magnetite project ramp-up.
The seaborne market faces a supply increase of 10-15 million tonnes in H2 2026 as new projects ramp. Simandou in Guinea remains on track for first production in Q4 2026, though initial volumes are expected to be modest at 2-3 million tonnes. Most of the supply growth comes from brownfield expansions at existing mines.
The high-cost tail of the supply curve is primarily Chinese domestic mines. Chinese domestic iron ore production is estimated at 240 million tonnes annually, with an average cash cost of $85-90/mt. At current seaborne prices of $100/mt, domestic Chinese miners are barely profitable. A decline toward $90 would force significant domestic output reductions, tightening the overall market.
Major miners will not cut production at $100/mt given their low cost base. Chinese domestic miners are the swing producers. Buyers should monitor Chinese domestic output as a leading indicator of price floors. If domestic output drops 5-10%, it would absorb excess seaborne supply and support prices near $95-100.