Brazilian mining company Vale has suspended wet processing operations at its Brucutu iron ore mine, halting most of the mine's 30mn t/yr capacity.
The company halted the operations after a court in Minas Gerais province suspended a previous order by a lower court that had allowed all operations at Brucutu to restart.
The Brucutu mine was shut down on 4 February following a court order, after which Brazil's environment agency withdrew the licence to operate the Laranjeiras tailings dam on 7 February. Vale's previous Brucutu update was on 21 March, when it said operations would resume in 72 hours after the court order.
The new order will affect around 25mn t/yr of iron ore capacity at the mine that is processed using the wet method, analysts at Morgan Stanley said. But the bank expects normal operations to resume in the near future as Vale has "good arguments" to appeal against the suspension of operations. Vale will continue dry processing of ore, which does not require the use of tailings dams.
A tailings dam breach at Vale's Feijao iron ore mine in Minas Gerais on 25 January has led to increased scrutiny of the company's other tailings dams in the province, resulting in operations being suspended at some mines.
The mining suspension lifted the iron ore futures market, with the most-active contract on the Dalian Commodity Exchange closing higher by 2.9pc today.
Vale is maintaining its iron ore shipment guidance of 307mn-332mn t in 2019 despite the latest court order. Its guidance is lower by 50mn-75mn t from 2018 shipments, with the possibility of sales coming in around the mid-to-bottom range of this forecast.
Vale said external auditors certified the stability of the structures at Brucutu, including the Laranjeiras dam, in March.
A fall in supplies from Vale would be likely to have more impact on the China iron ore market, as higher profit margins and steel production restrictions in cities such as Tangshan encourage mills to increase the use of premium medium-grade and high-grade ores to maximise output. Portside stocks of imported iron ore have been falling over the past few weeks because of lower supplies from Australia and Brazil, supporting prices.
Tighter supply of IOCJ fines and BRBF fines, Vale's best-selling products in China, have already lifted prices of these grades this week. The Argus-assessed portside BRBF fines on Qingdao port traded at a premium of 40 yuan/t ($5.90/t) to yesterday's Argus PCX 62pc portside fines price of Yn672/wet metric tonne, a seaborne equivalent of $91.70/dry metric tonne (dmt) . The Argus-assessed 65pc price, which closely tracks the IOCJ price, was higher by 50¢/dmt at $109.6/dmt.
