Australian iron ore miner Atlas Iron Ltd beat its full-year production guidance but warned it was selling ore at a discount due to soft market conditions caused by over supply. Atlas, which said it mined 10.9 million tonnes of iron ore in the fiscal year to June 30, sells ore exclusively to China. Atlas previously provided annual production guidance of 10.2 million to 10.7 million tonnes. The company on Thursday noted the iron ore market had softened as a result of the additional supply introduced by the major producers over a relatively short period. Combined with credit constraints in China this had led to lower prices for the benchmark 62 percent iron content ore and steeper discounts for Atlas’ lower grade ore over the second half, and in particular the June 2014 quarter, it said. Sector majors Rio Tinto and Fortescue Metals Group have also been forced to cut prices of low-grade iron ore cargoes to China, by up to 15 percent, as competition heats up amid rising supply. The move underscores the iron ore market’s move into surplus as fellow Australians Rio, BHP Billiton and Fortescue ramp up output, overwhelming demand growth in China. Iron ore has fallen by almost a third in 2014. In response, Chinese steel mills have wound back long-term supply contracts in favour of cheaper spot cargoes. Rio Tinto’s mines Australia recently reached a production rate of 290 million tonnes a year, with expansion work underway to increase the rate to 360 million tonnes a year. Rio is forecast to show a big rise in June-quarter iron ore output when it releases production data on July 16. On the same day, Fortescue, which targeted a 57 percent lift in output this year, is scheduled to disclose operational and pricing data for the June quarter and fiscal 2013/14. Fortescue has said its needs iron ore prices of $110-$120 a tonne in order to pay off a targeted $2.5 billion in debt. Benchmark iron ore <.IO62-CNI=SI> sells for $96.60 a tonne, up from a 21-month low of $89 a tonne on June 16. Morgan Stanley sees the benchmark price averaging $95 a tonne in the second half of 2014.