Heavy rainfall is disrupting southeastern Brazil’s giant iron ore industry, with the world’s No. 2 producer Vale SA among companies to halt operations and regulators dispatched to monitor any impact on tailings dams.
Vale partially suspended services on the Estrada de Ferro Vitoria a Minas railway as well as production at its southeastern and southern systems “to guarantee the safety of its employees and communities,” the Rio de Janeiro-based supplier said in a statement Monday.
The deluge in Minas Gerais state offers fresh impetus to a recovery in global prices of the steelmaking ingredient after a decline in shipments from Brazil and Australia. It’s also sounding alarms for tailings dams given the region was the site of two disasters in the past six years including a 2019 collapse that left 270 dead and cost Vale its title of the world’s No. 1 supplier.
Gerdau SA, Cia. Siderurgica Nacional SA and Usinas Siderurgicas de Minas Gerais SA also suspended operations in Minas Gerais this week. While the region represented 40% of Vale’s output in the nine months through September, the company reiterated its production guidance of 320 million to 335 million tons of iron ore in 2022.
In December, Brazil had 40 tailings dams on emergency level, 36 of which are in Minas Gerais, according to the country’s mining regulator. Three of those — all owned by Vale — are at the highest alert of level 3.
Authorities preventively evacuated people close to a hydroelectric dam in the municipality of Para de Minas, which is at risk of imminent failure.
Iron ore futures in Singapore advanced as much as 2.8% on Tuesday, bringing the rally to about 50% since November. Shipments from both Brazil and Australia have each declined almost 20% in the latest week, and coupled with mill restocking, that’s supporting prices, said Huatai Futures Co. analyst Wang Haitao.
The northern system, where Vale produces high-grade ore, continues to operate in line with the production plan, which the company says considers the impact of the rainy season on operations. Last week, Vale reported a landslide in copper project Salobo III, in Para State, also because of the rain.
CSN Mineracao SA said in a filing that extraction and movement operations at the Casa de Pedra mine were suspended due to the rain. CSN has also started dam emergency protocol, with its B2 dam at level 2.
CSN said it “does not involve risks to population because all residents of the Self Rescue Zone have already been relocated” and that the impact on production is not relevant.
Minas Gerais was doused by rain over the weekend, blocking highways. A dike owned by France’s Vallourec SA overflowed Saturday near the city of Belo Horizonte, and operations at Usiminas’s mining subsidiary Musa were temporarily suspended due to rains significantly higher than average.
(By Mariana Durao, with assistance from Krystal Chia)