FEATURE: Brucutu to reopen, market yoyos on Vale’s news
Further to the court ruling in Vale’s favour on March 19, the State Agency for Environment and Sustainable Development (SEMAD) granted mining company the Provisional Operational Authorization (APO) for the Laranjeiras dam, which will enable Brucutu to return operations in the next 72 hours as the mine has been mainly using the dam for the waste disposal.
The mine in Vale’s Southeastern System, Minas Gerais of Southeast Brazil, was halted in early February.
Vale’s news is yoyoing the market sentiment
So far this week, Vale has been updating the development of its mining operations including dams, mines, and ports everyday over March 18-21, and the mixture of “good and bad news” has been playing with the market sentiment especially the iron ore derivatives prices accordingly.
“In these days, the various news about Vale are stirring the market sentiment, and the iron ore futures prices have been tumbling in the past few days on the market anticipation of less affection on Vale’s supplies after all,” an iron ore trader from Fujian, South China, said.
Starting Monday, the most traded May iron ore contract on the Dalian Commodity Exchange has been fluctuating and on March 20, the contract plunged by Yuan 31.5/dmt ($4.7/dmt) from the previous day’s settlement price to Yuan 604.5/dmt at the close of the daytime trading session as a strong reaction to Vale’s March 19 announcement on the possibility of Brucutu’s resumption with the court ruling.
Not only the iron ore futures but the spot price has been moving in a similar pattern, with Mysteel’s 62% Australian iron ore fines price index swinging at $84.05-87.9/dmt CFR Qingdao over March 18-21.
The Fujian trader, however, warned that the market may be tired of following and reacting to supply-related news on the daily basis if this goes on longer.
“Investors both in the short and long position have been burned, no one has escaped because of the mixture of the news, it is rather exciting but also rather tiring, and some may just decide to stay away until the situation settles a bit,” a Singapore-based market source commented.
China’s iron ore supply not feeling stretched
Despite the official nearly 100 million tonnes/year iron ore capacity affection including Brucutu with Vale’s suspensions of mines, ports, and dams since January 25 when the tailings dam collapse happened at its Feijão mine in Brumadinho in Minas Gerais, China has not felt any real affection in supply yet, Chinese market sources noted.
“For now, the news is more playing with the market sentiment than anything else, as so far you can’t feel any notable supply shortage, and Chinese steel mills are not favouring higher-grade iron ore supplies anyway,” the Singapore source added.
Market sources anticipate the physical iron ore market will feel the hit in supply a few months later should Vale’s situation remain unchanged during the period, reasoning that most mining companies will stock up some tonnage at each of the production chain such as mining, processing, terminals and blending centres in Vale’s case.
Mysteel’s iron ore market tracking shows that so far both the iron ore shipment from Brazil or Brazilian iron ore inventories at the Chinese ports have not varied much, as over January 27-March 14, Brazil shipped 47.6 million tonnes of iron ore to the global market, only 3% less than a year ago.
As of March 14, Brazilian iron ore inventories at 45 major Chinese ports totalled 43.4 million tonnes, or accounting for 29.4% of the total volume at 147.7 million tonnes, the tonnage was at 35.7 million tonnes a year ago, or accounting for 22.3% of nearly 160 million tonnes of inventories at these ports then.
Vale’s BRBF and 65% Carajas prices have not shown signs of abnormal strengthening, still showing strong correlation with the 62% grade iron ore pricing index, according to Mysteel’s database.
The 62.5% BRBF price increased $10/dmt from January 25 to $87.3/dmt as of March 21, and the 62% Australian iron ore fines price index gained $8.85/dmt over the period to $84.05/dmt, all in CFR Qingdao, East China.
As for April, iron ore prices may still find some support as “the Chinese steel mills will probably need to procure additional iron ore before they ramp up their blast furnace production in April when the winter restriction is officially over given that most of them have kept iron ore stocks at their works low,” the Fujian trader said.
Vale’s 2019 production guidelines yet updated
Vale boasts 400 million t/y iron ore capacity and it set its guidelines of iron ore production at 400 million tonnes for 2019, and pellet at 60 million tonnes for 2019 prior to the accident, and it has not released any updates yet.
“It is hard for Vale to give out any specific numbers amid the complexity of the situation, and it may only provide a range basing on different scenarios when it finally releases its 2018 performance,” an industrial source close to Vale said.
Vale has been late releasing its fourth quarter and full-year performance of 2018 as it usually releases such results for the previous year in February of the following year.
Written by Victoria Zou, zyongjia@mysteel.com, and Hongmei Li, li.hongmei@mysteel.com
Mine |
Location |
Vale's iron ore system |
Status |
Jan-Sept 2018 output |
2017 output |
2016 output |
2015 output |
Abóboras |
Vargem Grande complex |
Southern System |
Halted operations on Feb 4 |
16.3 |
23.3 |
29.2 |
29.3 |
Vargem Grande |
Vargem Grande complex |
Southern System |
|
|
|
|
|
Capitão do Mato |
Vargem Grande complex |
Southern System |
|
|
|
|
|
Tamanduá |
Vargem Grande complex |
Southern System |
|
|
|
|
|
|
|
|
|
|
|
|
|
Jangada |
Paraopeba complex |
Southern system |
|
20.6 |
26.3 |
26.4 |
28.1 |
Fábrica |
Paraopeba complex |
Southern System |
|
|
|
|
|
Segredo |
Paraopeba complex |
Southern System |
|
|
|
|
|
Alto Bandeira |
Paraopeba complex |
Southern System |
|
|
|
|
|
João Pereira |
Paraopeba complex |
Southern System |
|
||||
|
|
|
|
|
|
|
|
Brucutu |
Minas Centrais |
Southeastern System |
Halted operation, declaring force majeure on Feb 5, ti resume operations in 72 hours on SEMAD's green light Mar 21 |
Capacity at 30 million t/y |
|
|
|
Timbopeba |
|
Southeastern System |
Halted operation on Mar 15 |
Capacity at 12.8 million t/y |
|
|
|
Alegria |
Mariana Complex
|
Southeastern System |
Halted operation on Mar 20
|
Capacity at 10 million t/y |
|
|
|
Vale's total iron ore output |
|
|
|
283.7 |
366.5 |
348.9 |
345.9 |
|
|
|
|
|
|
|
|
Pelletizing plant |
|
|
|
|
|
|
|
Fábrica |
pelletizing |
Southern system |
|
3.1 |
3.8 |
2.8 |
3.7 |
Vargem Grande |
Pelletizing |
Southern system |
|
5.0 |
6.4 |
6.4 |
6.4 |
|
|
|
|
|
|
|
|
Vale's total pellet output |
|
|
|
39.5 |
50.3 |
NOTE:
1. Both Southern and Southeastern System produce mainly lower grade, high silica supplies.
2. Unit: million tonnes
FMG ships 47.5 mln t of iron ore in Jul-Sept, up 4.2% YoY
Oct 27, 2022 12:00
BHP's iron ore unit cost climbs 13% on year in FY22
Aug 16, 2022 18:30
Vale's Q2 iron ore fines prices down, but costs rise
Jul 29, 2022 17:30
FMG raises its FY'23 iron ore shipments to 187-192 mln t
Jul 28, 2022 13:00
FMG's Apr-Jun iron ore production table
Jul 28, 2022 08:54