Vale S.A., based in Brazil is the second largest iron ore producer globally, engaged in metals and mining. On 25 January 2019, one of Vale’s tailings dams collapsed and some 300 people were killed, causing a widespread uncertainty in iron ore future. A local court in Itabira city of Brazil, located in Minas Gerais suspends the operations at two more dams of Vale in order to prevent any other potential disaster. Operations at Minervino and Cordão Nova Vista dams, part of the Cauê mine, are suspended. Now Vale is under pressure because it should present acceptable evidences that support the safety of remaining dams. These new suspensions will cause 21% reduction in Vale’s annual iron ore production. The iron ore producing decrease is estimated about 82.8 million tonnes annually. According to Vale this suspension has no significant influence on its operations because the Cauê mine is currently not using the affected dams. However Analysts have reclaimed their anticipations of influenced iron ore output to 70 million tonnes which was 40 million tonnes two weeks ago. The situation intensifies conflicts on the fundamental basis and can increase iron ore prices. This news affected the ferrous market and on Monday 18 March Benchmark construction steel rebar rates on the Shanghai Futures Exchange (ShFE) boosted more than 4% to a daily high of 3,908 yuan per tonne which is the highest in five months. The most-active hot-rolled coil futures on the ShFE also closed 2.3% higher at 3,709 yuan per tonne.
On the other hand steel mills of Tangshan, steel hub of China, are restricted strongly because of air pollution. So their steelmaking activities and their iron ore demand are reduced. The suspension of Vale’s dams and new steel mill’s restrictions happened at the same time and somehow offset each other. The real influence of Vale’s dam suspension will be shown on April when environmental restrictions in China are removed and iron ore demand appears.