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Iron ore advanced to the strongest level since the middle of October as heavy rains disrupted southeastern Brazil’s iron ore industry, with the world’s No. 2 producer Vale SA among companies halting operations and regulators sent to monitor the impact on tailings dams.
Vale has 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.
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 per cent of Vale’s output in the nine months through September, the company reiterated production guidance of 320 million to 335 million tons in 2022. Output may now be at the low end of the range, analysts said.
The deluge in Minas Gerais state provides fresh impetus to global prices of the steelmaking ingredient, which are up more than 50 per cent since the middle of November. 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.
On the demand side, traders are monitoring the spread of the omicron variant in top consumer China, with the northern port city of Tianjin a center of infection. Goldman Sachs Group Inc. cut its forecast for the country’s growth this year to 4.3 per cent from 4.8 per cent due to the difficulty of containing the variant.
Support for prices has also come from restocking by mills before the Lunar New Year holiday, which starts on Jan. 31.
Spot prices for iron ore are expected to stay firm, Mysteel Research & Consulting said in a note on Wednesday, citing higher activity from blast furnaces, restocking by mills and interrupted supplies from Brazil.
Iron ore futures in Singapore were up 1.8 per cent at US$130.55 a ton by 3:12 p.m., the highest intraday level since Oct. 12. Dalian iron ore futures climbed 1.9 per cent, while rebar and hot-rolled coil advanced at least 0.7 per cent in Shanghai.