Iron ore prices have jumped above $US96 a tonne despite the confusion about President Trump’s threat to impose higher tariffs on $US200 billion of Chinese imports into the US from Friday.
Rather than wobbling like other commodity prices and stock exchanges did, iron ore jumped $US1.81 a tonne, or nearly 2% on Tuesday to $US96.15 a tonne for 62 Fe ore landed in northern China on a CFR basis (that includes freight and insurance) according to the Metal Bulletin Index. That was close to a four year high.
The reason for the jump was a new Brazilian court action ordering Vale to halt work at bringing its 30 million tonnes a year Brucutu mine back online.
So now Vale has suspended wet processing work there (though it will still use dry processing of ore to stockpile supplies for when the mine is allowed back online by a court).
The halt came after a ruling by a court in Minas Gerais province suspended a previous order by a lower court that had allowed all operations at Brucutu to restart.
Analysts say that around 25 million tonnes a year will be affected – the remaining five million tonnes or so is produced by dry processing of ore.
The Brucutu mine was shut down on February 4 following a court order, after which Brazil’s environment agency withdrew the licence to operate the Laranjeiras tailings dam on February 4. Vale’s previous Brucutu update was on April 17, when it said operations would resume in 72 hours after the court order.
Vale said it expects normal operations to resume in the near future as it has “good arguments” to appeal against the suspension of operations. Vale will continue dry processing of ore, which does not require the use of tailings dams.
“Vale reiterates that the Laranjeiras dam and all the other geotechnical structures of Brucutu have valid Declaration of Stability (DCE) issued by external auditors in March 2019, and is taking the appropriate measures related to the decision,” the company said in a statement issued on Tuesday (Wednesday our time).
Vale said it “reaffirms its 2019 iron ore and pellets sales guidance of 307-332 Mt, as previously announced, and informs that its current sales volume expectation is currently between the bottom and the middle of the range.” That guidance was first issued a month ago when Brucutu was allowed to re-open.
The guidance is lower by 50 million-75 million tonnes from its 2018 shipments, with the possibility of sales coming in around the mid-to-bottom range of this forecast.
The company is expected to provide a further update on its shipments and 2019 estimates in its March quarter report tonight and its quarterly financial data. it is likely Vale will report a loss for the quarter.
Vale’s mining and export problems have been compounded by shortfalls from Pilbara miners, BHP, Rio Tinto, and Fortescue since late March.
