Sept. 3 (Bloomberg) -- Vale SA, the world’s largest iron ore exporter, is restarting idled mines on demand from Japanese and European steelmakers.

Demand outside of China is reviving, with Japanese mills making a “very fast” recovery, Jose Carlos Martins, executive director ferrous at the Brazilian company, said today. Chinese demand is “good,” he said.

Chinese crude steel output jumped to a record in July, and a decline in Japanese production slowed in the same month as the global economy improves. Vale earlier slashed production of iron ore, with shipments dropping 32 percent in the second quarter.

“We’re restarting mines,” said Martins in an interview in Seoul. “During the crisis we reduced our production as much as 30 percent. Now we’re bringing things back. It will take time, but this shows our confidence that market conditions are at least reasonable.”

Martins was visiting South Korea to mark the company’s first iron ore shipments for Hyundai Steel Co.’s new mill. South Korea’s largest construction steelmaker’s first blast furnace will start operation in early January next year.

Brazilian Market

Vale, which produced at an annual rate of 230 million metric tons of iron ore in the second quarter, can boost output to about 300 million tons should demand recover, Martin had said July 30.

During the first quarter, “only China was really bullish and the other markets including Europe were very bad,” Martins said. “Now, even the Brazilian market is becoming stronger and stronger.”

There’s a lot of “additional capacity to come into the market, but even this is not enough to create an oversupply,” Martins said. Vale is doing all it can to restart mines to meet contract obligations, he said.

The cash prices of Australian iron ore delivered to China the world’s largest buyer, has gained 13 percent this year. That’s lured local Chinese miners to increase output, Martins said. Prices will “adjust” closer to annual contract levels later this year, he said.

Vale is still waiting for Australia to settle annual prices with China, Martins said, reiterating previous comments by company executives. Rio Tinto Group and BHP Billiton Ltd., the world’s second and third-largest iron ore suppliers, export out of Australia.

China overtook Japan as the world’s largest buyer of iron ore in 2003. China, the biggest steelmaker, accounted for 52 percent of globally iron ore traded last year, according to Morgan Stanley. That could increase to 65 percent this year, the brokerage said July 2.

To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net

Last Updated: September 3, 2009 05:30 EDT