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Iron Ore Tops $100 As More Problems Beset Vale
By Glenn Dyer | More Articles by Glenn Dyer


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Global iron ore prices have finally topped the $US100 a tonne mark for the first time in five years, thanks to renewed concerns about the stability of supplies from Brazil where there are reports of signs of instability at a mine dam wall owned by Vale, the big miner.

The latest problem though is in a dam wall at a mine that hasn’t been in production for three years, unlike the dam wall collapse in January at the Brumadinho mine and in 2015 at the Samarco mine owned by Vale and BHP.

The news emerged during Friday’s ASX session and helped kick global prices over $US100 a tonne, with the rise being driven by Chinese futures prices which hit a series of all time highs (Chinese futures markets only started trading iron ore in 2016).

The Metal Bulletin index showed the price of the standard 62% Fe ore jumped 2.5% from Thursday to $US101.71 a tonne on Friday. That was up from $US97.24 a tonne the previous Friday, a rise of just under5% over the week.

The index for 58% fines showed an even larger jump on Friday – up $US3.02 a tonne on Friday to $US92.10 a tonne. The price for high grade 65% ore rose $US2.10 to $US115.60 a tonne.

The share prices of major miners, Rio, BHP and Fortescue were all higher on Friday – Rio Tinto shares ended up 2.1% to $101.35, BHP shares rose 2.5% to $38.46 and Fortescue shares jumped 6.6% higher at $8.95.

Fortescue shares were one of the best performers on the ASX last week thanks in part of the surge in global iron ore prices, but also the surprise news of the early payment of a 60 cents a share dividend before the end of the financial year.

The global price is now more than 30% above the levels before the January 25 disaster in Brazil at Vale’s Brumadinho mine and subsequent court orders to stop mining at a number of other operations where dam wall safety was in doubt.

But strong demand from Chinese steel mills is also helping, along with production and sales shortfalls from BHP, Rio, and Fortescue because of storms and fires (at two Rio export facilities) since January.

Chinese steel production hit an all-time record of 85.03 million tonnes in April and the cumulative figure is now well ahead of previous years’ levels.

The S&P Global Platts price reached $US100.40.

The latest news said Vale had detected movements in a pit at the northern slope of its former Gongo Soco mine in the country’s Minas Gerais state (where Samarco and Brumadinho mines are located) that could lead to a displacement of the slope and affect a nearby tailings dam.

Vale said it is evaluating the potential impact of vibrations caused by such displacement on Sul Superior. “The pit and dam are monitored 24 hours a day,” the miner said in a statement.

Vale told prosecutors that the dam near the south-eastern city of Barão de Cocais could burst this week if the current pace of movement in the embankment of the mine pit nearby continues

The dam contains waste from the Gongo Soco mine, which has been inactive since 2016. Hundreds of residents seen at risk have been evacuated from the surrounding area since February.

The latest dam is located some 60 kilometres from where the Brumadinho dam collapsed on January 25, leading to the deaths of almost 300 people.