Vale says no force majeure on iron ore shipments

Brazilian mining company Vale will not declare force majeure on iron ore deliveries after a mining accident last Friday and a subsequent decision to temporarily shut down 40mn t/yr of iron ore capacity.

"Vale won't declare force majeure because the output cuts are the result of the company's decision to temporarily shut some operations and not because of a natural disaster," Vale's spokeswoman Fatima Cristina told Argus.

The halt in production will be partially compensated by an increase in production in other units, she added.

Vale has decided to shut down 10 tailings dam at various mines after an accident at a dam killed 99 people in Brumadinho town. Production capacity of 40mn t/yr of southern system ores, including 11mn t/yr pellet capacity, will be temporarily shut down to facilitate closure of the dams. Vale will likely increase production at its 90mn t/yr S11D mining complex to make up for part of the production loss.

China's seaborne prices have increased sharply over the week with mills expecting a shortage of Vale's iron ore supply, especially BRBF fines, which has gained popularity since mid-2018 as mills have increased use of low-alumina ores.

Vale has 30mn t of iron ore stocks in Chinese and Malaysian ports, which can partially alleviate supply concerns in the short term, said an analyst report by Goldman Sachs.

Posco, South Korea's largest steelmaker and a major buyer of Vale's high-grade IOCJ fines, said it does not expect much increase in the term contract prices of iron ore as Vale's high-grade ore supply will not be affected by the accident.