Fire shuts down Vale’s Malaysia distribution center

One of Vale’s giant iron carrier docks at Brazilian company’s transhipment facility in Malaysia.

Iron ore mining giant Vale (NYSE:VALE) issued a statement Friday advising that there was a fire in one of the transfer houses of the belt conveyor system at its distribution center in Malaysia.

The fire reportedly caused material damage only and the company expects operations to resume in 10 to 15 days.

Vale expects reduced impact on its shipments, since a 10-day preventive maintenance was already scheduled at the terminal during the same period.

Wood Mackenzie senior research analyst Alex Griffiths weighed in on what the Malaysian distribution center shutdown means for the market.

The announcement came on the same day that eight Vale employees were arrested in Brazil as part of the ongoing investigation into the deadly dam collapse that left 166 people dead and over a hundred still missing.

“A 10 to 15 day unexpected shut-down translates to a 0.6 Mt to 1.0 Mt reduction in exports. But we do not think average export volumes will suffer,” Griffiths said in an email.

Vale ships on average around one vessel every two days from Malaysia but the distribution centre is capable of discharging one vessel daily.

“The center should be in a position to increase March shipments to make up for this loss. The capacity of the import berth (10,500 tonnes per hour) exceeds that of the export berth and so stocks can rise during normal operations,” said Griffiths.  “As Vale indicated a 10-day shutdown was coincidentally planned for this period the most likely outcome is that the company can make up any lost tonnages in March.”

Griffiths added that should the outage exceed the 10 to 15 day estimate, then Vale will have to make up around 0.06 Mt per day in lost shipments.

“The majority of material from the Malaysian distribution center is Brazilian Blend fines destined for China. A significant delay in restarting operations would add to pressure on this segment of the market – already likely to suffer in response to reduced supply following the tragic dam disaster on January 25th,” Griffiths noted.

The announcement came on the same day that eight Vale employees were arrested in Brazil as part of the ongoing investigation into the deadly dam collapse that left 166 people dead and over a hundred still missing.

As part of the fallout, Vale declared force majeure on some iron ore contracts after a court-ordered halt to the mine responsible for nearly 9% of its output following the dam burst.

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