The head of top iron-ore producer Vale estimates that a surge in energy and freight costs triggered by conflict in the Middle East is making about 10% of supply in the global seaborne market unprofitable.

“Prices should be today a little higher,” CEO Gustavo Pimenta said in an interview on Bloomberg Television. “Not because of supply and demand, but because of the impact of freight rates; fuel prices have been higher.”

Iron-ore futures in Singapore this week dipped below $90 a ton for the first time in two years, and are down about 15% in 2026 amid faltering Chinese demand and abundant global supply, including from new sources as Guinea’s Simandou mine. Meanwhile, a war-driven spike in energy prices has increased costs for miners like Vale.

Prices will likely recover as the costs for so-called marginal producers are discouraging production, Pimenta said. The roughly 10% of supply that’s currently unprofitable amounts to about 160-million tons, and about 15-million tons has already been brought offline due to higher costs, he said.

Pimenta expects the market to remain balanced and demand from China and other key markets to remain strong.

“In China the demand continues to be solid,” he said, adding there’s “a lot of growth” in other steel-producing countries like India and Vietnam.

The executive is also optimistic about policies in Brazil regardless of the outcome of an election at the end of this month. He said both candidates will be supportive of the business and see the benefit of strengthening the sector via expedited permitting and other measures.

Brazilians will go to the polls on Oct. 25 for a presidential runoff, with incumbent Luiz Inácio Lula da Silva facing Flávio Bolsonaro, a conservative who favors looser environmental rules and the development of natural resources by the private sector. Vale was privatized in 1997, but investors remain wary of the government’s clout through a golden share in the company, as well as policies involving mine permitting and key railway concessions.

Pimenta has pushed for measures to boost mining investment, including faster permitting and more geological mapping. A review of Brazilian rules protecting natural caves could unlock major projects, including a planned Vale iron-ore mine with 50-million tons of annual capacity.