Shanghai

Vale dam incident in Brazil pushes up prices. Iron ore prices shot up across the board on Monday January 28 amid market expectations of supply disruptions following a tailings dam failure at Vale’s Córrego do Feijão mine in Brazil.

MB 62% FE IRON ORE INDEX: $78.18 per tonne cfr Qingdao, up $3.49 per tonne.

MB 62% FE PILBARA BLEND FINES INDEX: $79.02 per tonne cfr Qingdao, up $3.49 per tonne.

MB 62% FE IRON ORE INDEX-LOW ALUMINA: $79.81 per tonne cfr Qingdao, up $3.59 per tonne.

MB 58% FE PREMIUM INDEX: $70.83 per tonne cfr Qingdao, up $4.47 per tonne.

MB 65% FE IRON ORE INDEX: $91.60 per tonne cfr Qingdao, up $2.50 per tonne.

MB 62% FE CHINA PORT PRICE INDEX: 585 yuan per wet metric tonne (implied 62% Fe China Port Price $77.04 per dry tonne), up 18 yuan per wet metric tonne.

Market Drivers

The MB 62% Fe Iron Ore Index, published daily by Fast markets MB, rose $3.49 per tonne on Monday, while the daily MB 65% Fe Iron Ore Index increased $2.50 per tonne. Last Friday’s tailings dam failure at Vale’s Córrego do Feijão mine near Brumadinho city in Minas Gerais state in south-east Brazil, has so far led to 58 deaths with 300 people still missing, as well as damaging facilities and loading terminals, according to reports.

Vale is yet to make an official statement about the impact on production or the iron ore products involved. Market participants expect potential disruptions to supply of the miner’s fines products including Standard Sinter Feed Guaiba/ Tubarao (SSFG/SSFT) and Sinter Feed High-Silica Guaiba/Tubarao (SFHG/SFHT). The Feijão mine is part of the Paraopebas complex in Vale’s Southern System.

Spot iron ore transaction prices also jumped at Chinese ports, with trades focused on Pilbara Blend fines. The mine produced 8.5 million tonnes of iron ore in 2018, out of a total output of 27.3 million tonnes from Paraopebas.

If the only affected materials are standard SSFG/SSFT, there will be little impact on Vale’s flagship product in the 62% Fe segment, Brazilian Blend fines, sources said. Brazilian Blend fines are produced by blending higher-Fe and lower-silica fines from Carajas in northern Brazil with lower-Fe and higher-silica fines from Vale’s Southern and Southeastern Systems.

“But if supplies of [high-silica] SFHG/SFHT are affected, then we may see reduced availability [of Brazilian Blend fines, leading to higher premiums for the brand,” an end-user source said. Premiums were heard offered $1-2 per tonne higher for index linked shipments of Brazilian cargoes.

The price movements were based on the visible market activity detailed below, which was included in the index calculation according to the published methodology. No data was discarded in the calculation of these indices.

There have been jitters among market participants over the weekend that mining inspections and restrictions could intensify in Brazil as a result of the dam failure, and could even spread to other origins such as China, leading to tighter iron ore supplies in the coming months.

Any data received under Data Submitter Agreements or subject to a confidentiality request will not be published.

Sao Paolo

Tailings dam fails at Vale’s Feijão mine, floods nearby community A rupture in a tailings dam at Vale’s Feijão mine in the city of Brumadinho, in the state of Minas Gerais in south-east Brazil, has flooded the company’s administrative facilities and part of the nearby Vila Ferteco community. “There is no confirmation about injured people at the site,” Vale said on Friday January 25.

“[The company’s] top priorities right now are preserving and protecting the lives of our employees and the community’s population.” However, Vale’s emergency tailings dam operation is already active, according to the miner, and images of the accident broadcast by local television stations show that local people were affected by the flood.

Feijão produces around 8 million tonnes per year of iron ore, according to the company’s 20-F form filed with the Securities and Exchange Commission (SEC).
The dam is one of two located at the mine and total capacity of both amounts to 1.3 million cubic meters of waste material.

Vale is the world’s largest iron ore producer with an expected 400 million tonnes of output for 2019 and beyond, from a capacity of 450 million tpy. Fastmarkets’ iron ore index of 62% Fe material delivered to Qingdao, China, was at $74.69 per tonne on Friday, up from $74.71 per tonne a day before and higher than $72.73 per tonne on December 31.

This accident happened a little more than three years after the Fundão tailings dam at the Samarco mine in Mariana, also in Minas Gerais, ruptured and flooded the Rio Doce basin. Samarco is a 50:50 joint venture between Vale and BHP. Vale and BHP formed a non-profit foundation called Renova after the accident, which is expected to spend 11.60 billion Reais ($3.08 billion) to repair and refund damages caused by the event.

Report By: Parya AhmadPour

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