Vale projects further iron ore output losses

Vale has projected an additional loss of 3mn t of iron ore output this year as it shuts down four tailing dams at its Fabrica iron ore mine in Brazil's Minas Gerais province.

The mine will continue operations through the dry processing of ores.

Vale's Feijao, Vargem Grande and Brucutu mines have already been closed, affecting around 51mn t/yr of iron ore output. Feijao has been closed since the 25 January accident that killed over 150 people, while Vargem Grande was closed later to decommission tailings dams. Brucutu was sought to be shut down by a court while a tailings dam licence for the mine was cancelled by the government. Vale is challenging both these decisions.

Vale has pledged to shut down its 10 remaining tailings dams in Minas Gerais province over one to three years affecting 40mn t/yr of output, including 11mn t/yr of pellet output.

China's seaborne iron ore prices are likely to remain supported in the short term with sufficient alternative mainstream ore supplies unlikely to emerge. Australia-focused producers BHP and Fortescue have said they are unable to make any significant increases in output in response to Vale's shortfall.

But price gains may be capped as low profit margins are driving more Chinese steel mills to increase the proportion of low-grade ore ores in their furnace burden, with some even seeking to expand their use of non-mainstream ores.