Vale, the world\u2019s largest producer of iron ore has delivered a stern message for anyone expecting the prices of the steel making ingredient to return to the heady days of 2011. Vale\u2019s CEO on their annual investors day stated that the company is prepared to unleash as much as 50 mnte of spare capacity to balance the market if prices get too high. He expects high iron ore prices would lure inefficient producers back into the market, repeating the risky phenomenon of excess supply which led to value erosion of ~$1 trillion in the past. Vale\u2019s stance for a more stabilised iron ore market in the coming years. We expect a demand supply balance for iron ore to remain stable even if Chinese steel production declines at 2% p.a. for the next 3 years. We don\u2019t see meaningful scope for shift in profit share to iron ore producers, similar to CY06-13 . A stable pricing regime works well for Indian producers like NMDC. We maintain a 'Buy' with a target price of Rs 158 Vale\u2019s new stance of market responsibility contrasts with the producer\u2019s bravado just a few years ago, when they battled for market share amid seemingly insatiable demand from Chinese mills. It has now shifted focus to high-grade deposits in northern Brazil\u2019s Amazon region where it expects to produce 390 mnte next year and cap output at 400mnte over the following four years, well below its 450 mnte capacity. These developments follow a surge in demand for high \u2013quality ore from Chinese steelmakers as they comply with the government\u2019s anti-pollution push. This has led to an increase in premiums for high-quality ore by nearly five times greater than what it was two years ago. These factors indicate a change in industry dynamics, which is now chasing value over volume and flight to quality. Vale has been building capacity to house blended ores offshore, allowing it to maximize margins by mixing in lower-quality ore from its southern system. It plans to lower the amount of ore it sells directly from its southern mines from a level of 41% in 2016 to 24% next year, increasing the share of sale of high-grade and blended ore to 75% by 2018. This increase in volumes for high-grade ore augurs well for high-grade iron ore producers like NMDC.