SAO PAULO/RIO DE JANEIRO (Reuters) -Brazilian miner Vale posted on Tuesday its highest annual iron ore production since 2018, even after a decline in output in the fourth quarter when the company prioritized higher-margin products.

One of the world's largest iron ore suppliers, Vale's production of the steel ingredient reached almost 328 million metric tons in 2024, up 2% from a year earlier. It expects to produce between 325 million and 335 million tons of iron ore in 2025.

"Vale's performance in 2024 was marked by greater operational stability and the start-up of key projects," the miner said in a statement.

In the fourth quarter, iron ore production fell 4.6% from the same period a year earlier to 85.3 million tons.

Vale said the decline followed its decision to prioritize the output of higher-margin iron ore products, which led to lower production from its Southern System operations in Brazil, which produce iron ore with lower ferrous content than its other mining assets.

Iron ore sales fell about 10% in the fourth quarter from a year earlier to 81.2 million tons, as Vale decided to reduce sales of high-silica products in the period to improve all-in pricing premiums.

BTG Pactual analysts said weaker iron ore sales were the main highlight of the report.

"Vale is making a sensible decision to protect iron ore price realizations and product mix," Leonardo Correa and Marcelo Arazi wrote in a note to clients.

They added that going forward the market will need further clarity on the strategy ahead in order to understand the extent of the gap between the company's shipments and production.

The average realized price of Vale's iron ore fines was about $93 per ton in the quarter, falling about 21% year-on-year, but up nearly 3% from the third quarter.

BASE METALS

Vale's copper production increased nearly 3% year-on-year to 101,800 tons in the fourth quarter, helped by Brazil's Salobo and Canada's Sudbury operations, and the ramp-up of underground mines in Canada's Voisey's Bay, the report said.

Copper sales rose 1.5% to 99,000 tons in the same period.

"As the company works to turn around the base metals division and stabilise operations, the outperformance at copper is a good sign of things to come, in our view," RBC Capital Markets analysts said in a note.

The company also produced 45,500 tons of nickel in the fourth quarter, up around 1% from a year earlier, due to a stronger performance at its Onca Puma, Sudbury and Voisey's Bay operations. It sold 47,100 tons of nickel, down nearly 2% from the same period a year earlier.