Vale is poised to deliver its first quarterly profit increase in more than two years after costs declined and iron-ore prices beat analysts’ forecasts.

The world’s largest iron-ore producer will on Wednesday post third-quarter net income of $2.8bn, data compiled by Bloomberg show. That would be 70% more than a year earlier and the first increase since the second quarter of 2011.

Vale’s 96% estimated increase in year-on-year earnings per share is the most among 14 global peers.

Vale, a supplier of iron-ore for steel makers from ArcelorMittal to China Steel, cut $1.65bn of costs in the first half and is benefiting from rising demand from steel mills in Asia. Iron-ore prices averaged $132.5 a ton in the third quarter, 18% more than last year and above the $121 a ton forecast expected by analysts when this year started.

"There are better realised prices and an improved performance in terms of costs," Goldman Sachs Group analyst Marcelo Aguiar said by telephone from Sao Paulo. "We expect an increase in the production of the company’s three main businesses: iron ore, nickel and copper."

Vale, based in Rio de Janeiro, probably will report that third-quarter earnings per share excluding extraordinary items increased to 61.8c from 31.5c a year earlier, according to the average estimate of 13 analysts in a Bloomberg survey. Vale will release earnings after the close of regular trading hours.

For the full year, Vale’s net income will total $11bn, according to the average of 15 analyst estimates compiled by Bloomberg. That would be double last year’s profit.

Rio Tinto is forecast to post $7.51bn net income this year while BHP’s fiscal-year profit is estimated at $14.4bn, according to the analysts.

Vale paid $4.5bn in dividends this year, 13% more than initially planned, as prices for the steel-making ingredient remain above analysts’ consensus on higher-than-expected Chinese consumption. The company paid $6bn in dividends last year, half the record $12bn returned to shareholders during 2011, which included share buybacks.

"A powerful combination of higher iron-ore sales volumes, higher iron-ore prices, weaker Brazilian real, and controlled costs should propel Vale’s operating performance," Banco Santander analysts Felipe Reis and Alex Sciacio said in a note to clients last month.

The outlook in China, the biggest buyer of iron ore and source of 32% of Vale’s operating revenue, improved more than expected, CEO Murilo Ferreira has said. Imports of the raw material by Chinese steel mills rose to 75-million tons in September, a record, driving prices to the highest in almost two months.

Vale had been delivering iron ore to China for 40 years and the conditions for the incoming months were improving, Mr Ferreira, who was in the Asian country last week, told reporters in Brasilia. "We may have a favourable trend in the next few quarters. I see a very positive political environment in China."

BHP, the world’s largest miner, raised its full-year iron-ore production forecast last month after first-quarter output of its biggest earning unit jumped 23%.