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Vale to suspend operations at iron ore mines: Update

  • : Metals
  • 19/01/30

Adds analysts, market reaction and background

Brazilian mining company Vale will remove around 10pc of its annual iron ore output capacity as it decommissions 10 tailings dams at various mines in the next three years, after an accident at the Feijao mine left 65 people dead and 279 missing in Minas Gerais province.

The total loss of production from the suspension of operations is expected to be around 40mn t/yr, including 11mn t/yr of pellet output. The decommissioning of the dams will cost around $1.3bn.

Vale said it will increase production at other mines to make up for loss of output but did not give details. Vale is currently raising production at its 90mn t/yr S11D complex in the Carajas region. Vale estimated output of 390mn t of iron ore in 2018.

Vale will temporarily halt the production of the units where the dams are located, which are the Aboboras, Vargem Grande, Capitao do Mato and Tamandua operations in the Vargem Grande complex and the Jangada, Fabrica, Segredo, Joao Pereira and Alto Bandeira operations in the Paraopeba complex. The fatal dam burst on 25 January was at the Feijao mine that is part of the Paraopeba complex. Work will also be stopped at the Fabrica and Vargem Grande pelletising plants. The operation of the halted units will be resumed as the decommissioning works are completed.

Both the Paraopeba and Vargem Grande complexes are part of Vale's southern system mines, which produce high-silica medium-grade fines such as SSFG and SSFT fines. Vale has said over the past year it plans to reduce production of these fines as it ramps up output of high-grade ore in the Carajas complex. The southern system fines are blended with the 65pc basis Vale IOCJ fines to produce the BRBF fines, a best-selling medium-grade ore in the Chinese market.

Vale's mine closures lifted prices of portside iron ore and futures in China. The most active Dalian iron ore futures contract was higher by around 6pc AT 12.14pm Singapore time (04:14 GMT). Offers for PB fines were at 605-630/wet metric tonne (wmt), or a $80-83.35/dry metric tonne seaborne equivalent, in the morning, up by Yn40/wmt from yesterday's offer prices. Deals for PB fines were done at Yn605/wmt, Yn615/wmt and Yn620/wmt at Caofeidian port.

Brazilian public prosecutors ordered the arrest of five people involved in licensing Vale's Corrego do Feijao tailings dam that ruptured last week. Authorities are investigating whether the technical documents used to certify the dam's safety were fraudulent. Vale is co-operating with investigations, the company said. An additional $215mn in Vale assets was frozen by the department of labour, in addition to $2.65bn that has already been frozen earlier by the Minas Gerais public prosecutor.

A securities class action lawsuit has been brought against Vale in a New York district court alleging the company provided false and misleading information about the risks and potential damage of a potential breach in Feijao dam. "Vale intends to defend vigorously against the claims," the company said.

Short-term price increases

Vale could quickly bring idle and new capacity on stream to minimise production losses at the southern system mines, said analyst reports by investment banks Goldman Sachs and Morgan Stanley.

Goldman Sachs forecasts a 10-15mn t/yr net loss of Vale's output while Morgan Stanley expects any production loss to be minimal. But both expect an upside to iron ore prices in the short term as a result of Vale's decision today. Goldman Sachs has revised its three- and six-month price forecasts for 62pc basis fines at $80/dmt and $70/dmt from an earlier forecast of $70/dmt and $60/dmt respectively. Iron ore prices may remain high for a few quarters as a result of Vale's decision, said Morgan Stanley.

Both investment banks said any price upside for pellet may be sharper as it will be difficult to replace the 11mn t/yr capacity to be shut down temporarily. The suspended capacity represents around 10pc of the seaborne pellet market, which could see pellet premium test September highs of a $90/dmt premium to the 62pc reference fines index, said Goldman Sachs. The price upside for pellet may persist longer than that for other ores, said Morgan Stanley.

Low alumina iron ore supplies will fall by a large extent in the Chinese market, which could support demand for such fines if steel mills' profitability and demand for quality ores improves in the spring months, said a Beijing-based trader.

Prices of low-alumina, 63pc basis BRBF fines had increased sharply from mid-2018 before easing back since November as steel mill appetite for premium ores cooled. Vale had blended 75mn t BRBF fines in China in 2017 and planned to blend around 100mn t in 2018, although there is no update on actual volumes yet. A cargo of BRBF fines was offered at Yn680/wmt at Rizhao port, higher by Yn60/wmt from yesterday's traded price, at the same level as price of 65pc basis IOCJ fines last week.

BRBF fines supplies will be affected with lower availability of southern system fines. The price upside will be more for low-alumina ores such as Trafigura fines, CSN fines and Mauritanian ores and less for PB fines and Newman fines, said a south China-based trader.

The proportion of BRBF fines in the furnace burden is typically less than 15pc in Hebei and Shandong provinces, although it higher than 20pc in Shanxi and south China, said the manager of a Hebei-based mill, adding mills could switch to using more Australian ores if BRBF fines prices rise too much. A large international trading firm reported substantial BRBF fines stocks in portside markets, which it now expects to sell at a higher price in the short term.

Enquiries for Vale's low-alumina SFLA fines also increased with a February delivery cargo offered at $9/dmt premium to the March 62pc index.

Prices of Indian pellet are expected to be firm in the short term though ample portside stocks may curb upside, said the manager of a Hong Kong-based international trading firm. Indian 64pc Fe pellet is the most widely traded in China's spot markets. Prices have fallen to around $109-110/dmt cfr China from highs of $150-160/dmt in September and October. Pellet demand remains robust in India, which will definitely push up export prices if Chinese demand increases in the short term.

"A lot of the price movement in iron ore we have seen this morning is speculative. If steel prices do not follow the increase in iron ore prices, mill profits will be squeezed further which will pressure iron ore prices," said a Shanghai-based trader.

Additional supplies from Anglo American's Minas Rio mine, which was reopened this month, as well as from Vale's Carajas mines will largely plug any supply deficit from the affected mines, so seaborne supply and demand may remain in balance this year, said a Shanghai-based trader.

Accident summary:

  • Dam I of the Corrego do Feijao Mine in Brumadinho, Minas Gerais in southeast Brazil was breached on 25 January. The death toll has risen to 65 with hundreds missing.
  • The dam had been inactive for three years and was being planned for decommissioning.
  • The height of the dam was 86m and had a crest length of 720m. It held 11.7mn m³ volume of upstream mining waste, mostly silica and water, with no pond associated with it.
  • The dam was built in 1976 by Ferteco Mineracao and acquired by Vale in 2001.
  • The dam had stability condition statements issued by geotechnical firm TUV SUD do Brasil in June and September 2018 for its periodic safety reviews. Biweekly inspections were reported to regulators with the last inspection in regulator's records for 21 December, with two inspections in Vale's system for 8 January and 22 January.
  • The Minas Gerais public prosecutor's office froze $2.65bn of Vale's assets after the accident.
  • This dam accident follows the 2015 Samarco mine spill that was the country's worst environmental disaster and killed 19. Courts have not yet set final penalties for the Vale and BHP joint venture.
  • Vale's Paraopeba mining complex has 13 dams and structures with three at the Feijao mine.
  • The Feijao mine produced 7.8mn t in 2017 and 8.5mn t in 2018 out of a total 26.3mn t and 27.3mn t by the Paraopebas complex.

Other market views:

  • Vale has around 30mn t of iron ore inventories in China and Malaysia, which should alleviate short-term supply stress, Goldman Sachs said.
  • Anglo American's Minas Rio mine that started operations last month "could be affected" and Samarco "is unlikely to restart in the foreseeable future", Goldman Sachs said.
  • The Minas Rio restart might add 19mn t/yr to seaborne markets to help balance markets, a Shanghai trader said.

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24/09/18

US Fed cuts rate by half point, signals more: Update

US Fed cuts rate by half point, signals more: Update

Adds chairman Powell comments, economic projections. Houston, 18 September (Argus) — The US Federal Reserve cut its target interest rate by 50 basis points today, the first rate cut since 2020, with policymakers signaling they expect to make another half-point worth of cuts by the end of 2024. The Fed's Federal Open Market Committee (FOMC) lowered the federal funds rate to 4.75-5pc from the prior range of 5.25-5.5pc, which was a 23-year high. The Fed had kept the target rate unchanged since July 2023 after hiking it for more than a year in the most intense rate-tightening campaign in four decades to quash inflation, which peaked at 9.1pc in mid-2022. "The committee has gained greater confidence that inflation is moving sustainably toward 2pc, and judges that the risks to achieving its employment and inflation goals are roughly in balance," the FOMC said in its statement after the two-day meeting. "Job gains have slowed, and the unemployment rate has moved up but remains low." In their latest economic projections, the Fed board and policymakers expect the target rate range will end 2024 near a midpoint of 4.4pc compared with an end of year midpoint of 5.1pc projected in June, which implies further cuts amounting to 50 basis points by the end of 2024. Policymakers also penciled in another 100 basis points of cuts over the course of 2025. "We're recalibrating policy down over time to a more neutral level and we're moving at the pace that we think is appropriate given developments in the economy," Fed chair Jerome Powell told a press conference after the meeting. "The economy can develop in a way that will cause us to go faster or slower. The US economy is in a good place and our decision today is designed to keep it there." The Fed's economic projections see core Personal Consumption Expenditures inflation — the Fed's favorite measure of inflation — ending 2024 at a median rate of 2.6pc, down from a prior forecast of 2.8pc. Policymakers see core PCE inflation falling to a median of 2.2pc by the end of next year. The outlook for the unemployment rate for the end of 2024 climbed to 4.4pc from 4pc penciled in at the June meeting. Policymakers expect gross domestic product (GDP) growth to end 2024 at an annual 2pc, slightly down from a prior 2.1pc projection. The latest policy meeting comes as the Consumer Price Index (CPI) eased to an annual 2.5pc in August , down from 2.9pc in July, the Labor Department reported on 11 September. Inflation had ticked up to 3.5pc in March from 3.1pc in January, prompting the Fed to turn more cautious about beginning its rate cuts. US job growth has recently slowed sharply, falling to an average 116,000 in the three months through August from 211,000 for the prior three months. The jobless rate rose to 4.3pc in July, the highest in three years, before edging down to 4.2pc in August. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US Fed cuts rate by half point, signals more to come


24/09/18
24/09/18

US Fed cuts rate by half point, signals more to come

Houston, 18 September (Argus) — The US Federal Reserve cut its target interest rate by 50 basis points today, the first rate cut since 2020, with officials signaling they expect to make another half point worth of cuts by the end of 2024. The Fed's Federal Open Market Committee (FOMC) lowered the federal funds rate to 4.75-5pc from the prior range of 5.25-5.5pc, which was a two-decade high. The Fed had kept the target rate unchanged since July 2023 after hiking it for more than a year in the most aggressive increase campaign in four decades to quash inflation, which peaked at 9.1pc in mid-2022. "The committee has gained greater confidence that inflation is moving sustainably toward 2pc and judges that the risks to achieving its employment and inflation goals are roughly in balance," the FOMC said in its statement after the two-day meeting. "Job gains have slowed, and the unemployment rate has moved up but remains low." The Fed board and policymakers, in their latest economic projections, expect the target rate range will end 2024 near a midpoint of 4.4pc compared with an end of year midpoint of 5.1pc projected in June, which implies further cuts amounting to 50 basis points by the end of 2024. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Japan's Tokyo Steel cuts sales prices on weak demand


24/09/18
24/09/18

Japan's Tokyo Steel cuts sales prices on weak demand

Shanghai, 18 September (Argus) — Japan's steel manufacturing firm Tokyo Steel said it will cut domestic steel product prices for October, marking the first full-scale price cut in over four years. The decision was driven by sluggish domestic demand and increased competition from cheaper imported steel products. Tokyo Steel will reduce prices across all product lines starting October, with steel coils and plates dropping by ¥15,000/t, shaped beams by ¥12,000/t, and tubes and deformed bars by ¥10,000/t. The company had maintained stable domestic steel prices for an extended period on the back of the steadier domestic demand and market conditions compared to the more volatile overseas market. The last price cut for deformed bars was in July 2023. Steel sales in Japan were weak during the third quarter, impacted by rising procurement costs for materials, a shortage of construction capacity, and an influx of cheaper steel products from China in the seaborne market, market participants said. A decline in profitability pushed Japanese mills to cut production costs. From 11 July to 14 September, domestic scrap prices at Tokyo Steel's Utsunomiya plant dropped by ¥12,500/t, or 23.8pc. Market sentiment in Japan remains bearish due to economic uncertainty and the strengthening of the Japanese yen. The upcoming adjustments in US monetary policy could add further volatility to exchange rates. "We may see more corrections in the Japanese domestic market," a trade source said. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

July EU HRC imports show 175,000t pullback


24/09/17
24/09/17

July EU HRC imports show 175,000t pullback

London, 17 September (Argus) — EU hot-rolled coil (HRC) imports surpassed 1.5mn t in July — a record high — as importers for the first time faced a cap to the ‘other countries' safeguard quota, which led some to purchase back-up material from other sources. More importantly, official figures show that around 175,000t were pulled back from customs clearing, likely all in Italy, after the initial quota numbers were made available in early July from Egypt, Vietnam, Japan and Taiwan. This leftover amount will likely all be custom-cleared in October, in addition to material that has arrived since July, as market participants expect importers to clear all of their HRC to avoid the risk of retroactive duties, potentially applicable from December. Imports from Taiwan, India, Turkey and Japan in July all surpassed the 200,000t mark each, with total imports from those four origins close to 900,000t, a sharp year-on-year increase. Vietnam saw volumes drop ( see table ), while South Korean imports fell by 75pc on the year to 40,379t and Serbian imports were down by 10pc to 37,437t. Hot-dipped galvanised (HDG) imports were at a record high, topping 750,000t in July, with nearly 30pc of the total from Vietnam. There has been concern in the market that the EU might start an investigation on Vietnamese HDG, as volumes have been on the increase, while suppliers are regularly the lowest-priced in the market. Plate imports were also at a record high, as EU producers are preparing to file for an investigation on some origins. Meanwhile, the increase in imports and the drop in EU demand has led producers to seek export outlets, with EU HRC exports rising on the year and on the month in July to nearly 230,000t, with the bulk going to the UK, US and Turkey. Downstream product exports also increased. By Lora Stoyanova and Colin Richardson July EU HRC imports t July y-o-y ±% Taiwan 227,892.8 8.2 India 225,558.6 134.8 Turkey 223,185.9 255.2 Japan 210,842.9 6.5 Egypt 158,625.7 31.9 Vietnam 144,202.0 -59.5 Ukraine 101,721.2 118.5 Australia 51,784.0 104.4 Saudi Arabia 40,594.8 -36.4 Total 1,565,744.2 9.1 — GTT Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US to impose 25pc tariffs on Chinese critical minerals


24/09/13
24/09/13

US to impose 25pc tariffs on Chinese critical minerals

Houston, 13 September (Argus) — The US plans to impose 25pc tariffs on Chinese minerals including indium, tantalum, chromium, cobalt and tungsten, citing China's efforts to dominate global supply chains, according to the office of the US Trade Representative (USTR). The USTR determined not to exclude any critical minerals from the proposed Section 301 tariffs. The USTR said the concentration of mining and refining capacity of these minerals in China, as well as China's effort to dominate the global supply chains for these minerals, endangers US national security and clean energy goals. The Section 301 tariffs on indium, tantalum, chromium, cobalt, and tungsten will go into effect on 27 September. Tariffs on natural graphite and permanent magnets will go into effect on 1 January 2026. China is the leading producer and exporter of indium, producing an estimated 650t in 2023, about 66pc of the global total, according to the US Geological Survey (USGS). The US imported 219 metric tonnes (t) of unwrought indium in 2023, including 10t from China. So far in 2024 the country has imported 148t, of which 45t originated in China, according to data from the US Commerce Department. Indium is primarily used globally for its electric conductivity in a variety of screens including liquid crystal displays (LCDs) as well as fiber-optic cables and other technical components. US consumption is more focused around solders and specialty alloys. The US imports more tantalum powders, alloys, and metals from China than any other country. The US imported 321t of unwrought tantalum in 2023, including 132t from China and has imported 269t between January and July 2024, including 178t from China. Tantalum is primarily used in high-temperature alloys and capacitors. Although China accounted for only 3.3pc — 79t — of global 2023 mine production, the USGS estimated the country had a world-leading 240,000t of tantalum reserves. Chromium is primarily used in stainless and heat-resistant steels. China is the world's largest producer of ferrochromium and stainless steel. The US imported 103,034t of chromium ores and concentrates in 2023, including just 10t from China. Still, the US did import 9,302t of unwrought chrome metal from China so far in 2024, which accounted for 74pc of total volumes, and US reliance on China for the metal has increased since sanctions forced Russian supplies off the table. Although China does not mine a significant amount of cobalt, it is the world's leading cobalt refiner and consumer. The US imported 18t of cobalt ores and concentrates in 2023, including 11t from China, and imported 11t between January and July 2024, including 6t from China. The US imported 1.6mn contained kilograms (ckg) of tungsten carbides in 2023, including 906,000ckg from China and imported 1mn ckg between January and July 2024, including 491,000ckg from China. Tungsten is primarily used in carbide parts for construction, metalworking, mining, and drilling applications. Tungsten is also used in specialty steel fabrication as well as in electrodes, filaments, and wires for various electrical and electronic products. By Cole Sullivan Critical Mineral Tariffs metric tonnes, t HTS Code Resource Name Imports from China, 2023 Imports from China, 2024 through July 2605.00.00 Cobalt ores and concentrates 11 6 2610.00.00 Chromium ores and concentrates 10 52 2611.00.60 Tungsten concentrates 139 46 2825.90.30 Tungsten oxides 212 19 2841.80.00 Tungstates (wolframates) 0 0 2849.90.30 Tungsten Carbide* 906,375 491,371 8101.10.00 Tungsten, powders 0 0 8103.20.00 Tantalum, unwrought 132 178 8112.92.30 Indium, unwrought; powders 10 45 Source: US Commerce Department *unit of measure is kilograms contained Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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