https://www.spglobal.com/platts/en/...rtfall-could-reach-90-million-mt-year-sources
Analysis: Brazil iron ore shortfall could reach 90 million mt/year: sources
- METALS
- 05 Mar 2019 | 20:49 UTC
- London
The iron ore market could lose as much as 90 million mt/year of supplies from Brazil -- about a quarter of the country's total export capacity -- from output curbs following the fatal tailings dam burst at Vale's Corrego do Feijao mine January 25, informed sources close to the Brazilian miner said this week.
Register Now
In addition to the 40 million mt/year already affected over a three-year period at Vale's Paraopebas and Vargem Grande systems -- partially offset from supplies from other Vale mines -- and 30 million mt at Brucutu mine, the estimate includes lost output from miners, including ArcelorMittal Mineracao, Usiminas Mineracao (Musa), and Gerdau Acominas, where measures were understood to have been taken to ensure tailings dams safety since the Vale accident.
Two weeks ago, analyst Wood Mackenzie said it had identified 8 million mt/year of capacity that is likely being affected at non-Vale mines. But the stepping up of dam safety checks and controls by Brazil's National Mining Agency ANM since mid-February now is expected to further extend this loss, possibly reaching the Itabira mining hub in Minas Gerais state, southeastern Brazil, according to sources close to Vale.
"What was expected to have a peak impact of 40 million mt/year at the very most, and in staggered form, has already reached 90 million mt/year because of the government authority actions, which followed Vale's decision" to close the Paraopebas and Vargem Grande area mines), said one source. "What was expected to be an orderly plan has been extrapolated and now ore and pellets will go short. There's no way they can't go short."
Three weeks ago, analysts at ANZ bank "conservatively estimated" a global iron ore market supply shortage of 43 million mt this year resulting from the production disruptions in Brazil.
But JP Morgan analysts this week signaled a greater loss in Brazilian exports for this year, in line with the acceleration of government shutdowns of a number of mining and tailing dam operations. The government has now prohibited the use and construction of upstream dams in Brazil by 2021, it said.
"Accelerated upstream dam decommissioning plans, along with government forced closures, are likely to last three to four years, in our view. Pre-accident guidance from Vale was 400 million mt, and there is now 70 million mt of closures before offsets. Our revised forecasts are 347 million-360 million mt in 2019-20 (we assume Vale can ramp volumes in unaffected areas by 25 million-35 million mt in 2019/20). Elsewhere, there is also pressure on other producers, with Anglo running out of tailing storage capacity by the end of the year in the absence of an operating license, placing 25 million mt at risk. Overall, reduced Brazil volumes, combined with a less bearish China steel production forecast, have balanced our supply/demand model," said Sao Paulo-based analyst Rodolfo Angele.
JP Morgan raised its 2019 iron ore price forecast 11% to $77/mt from $70/mt and its 2020 forecast 8% to $70/mt from $65/mt.
"Spot at $85/mt remains above our base-case estimates; however, destocking, potentially more scrap usage, and higher Chinese domestic supply are likely to take away some pricing tension over the medium term," it said Sunday in a note.
SPECULATION EMERGES OVER BRUCUTU RESTART
Speculation has emerged in the past week that an early restart at Brucutu may now be on the cards.
Market players were surprised at the Minas Gerais state's environmental secretariat's action, through a court order in early February, to close Brucutu, which is understood not to have serious tailings dams issues because it is a relatively new mine that has been operating around 10 years. Some market sources see the closure as politically motivated.
One major steelmaking source told S&P Global Platts that Brucutu is expected to restart production within three months after necessary relicensing. Another said it had heard a resumption of activities was already being planned.
Vale said Tuesday that it had no update regarding Brucutu, whose closure led the company to declare force majeure on certain iron ore and pellets shipments. Vale had said February 5 that "there is no technical basis, nor risk assessment, to justify the court decision to suspend the operation."
According to cFlow, Platts trade flow software, Vale's iron ore exports have risen, rather than fallen, in the weeks following the January 25 dam burst, apparently because of the existence of stocks at Brazilian ports.
CHINA IRON ORE OUTPUT RISE SEEN MAY/JUNE
Barclays Research said that the impact of the Vale accident is likely to be felt most by Chinese steelmakers in March and April. Barclays analyst Ian Littlewood said Chinese mine output can meet some of Vale's lost production. "By May and June, [Chinese] domestic mine production should be at its seasonal peak and, in combination with ... ample port stocks, this should lead prices lower," Littlewood said.
He noted that while mine output in the Tangshan area is expected to remain stable, "mine supply does have the potential to increase further north in China and in Inner Mongolia, though, where local governments are likely to favor tax revenue from mining over limiting pollution. We also note that adherence to environmental shutdowns is less strictly observed in mining, compared to steel mills, in part because mines tend to be in more remote locations, where it is harder to monitor them."
Barclays Research Tuesday reaffirmed forecasts for the iron ore price to decline to $69/mt in Q2, before sliding further to $65/mt by the end of the year.
Brazil is the world's second-largest iron ore producing country, with recent output levels of well over 400 million mt/year, with most for export markets and more than 60% of this coming from Minas Gerais state, where most of its tailings dams are located.
-- Diana Kinch,
- Forums
- ASX - By Stock
- FMG
- Iron ore price
Iron ore price, page-10766
-
- There are more pages in this discussion • 43,262 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add FMG (ASX) to my watchlist
|
|||||
Last
$17.26 |
Change
0.250(1.47%) |
Mkt cap ! $53.14B |
Open | High | Low | Value | Volume |
$17.22 | $17.37 | $17.10 | $105.8M | 6.139M |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
1 | 3000 | $17.23 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$17.27 | 19878 | 3 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
1 | 3000 | 17.230 |
3 | 880 | 17.220 |
1 | 100 | 17.210 |
7 | 1222 | 17.200 |
5 | 2519 | 17.190 |
Price($) | Vol. | No. |
---|---|---|
17.270 | 19878 | 3 |
17.280 | 10286 | 3 |
17.290 | 7000 | 3 |
17.300 | 79885 | 21 |
17.310 | 6557 | 3 |
Last trade - 16.10pm 20/08/2024 (20 minute delay) ? |
Featured News
FMG (ASX) Chart |
The Watchlist
CC9
CHARIOT CORPORATION LTD
MD - Shanthar Pathmanathan, Geologist - David Trabert
MD - Shanthar Pathmanathan
Geologist - David Trabert
SPONSORED BY The Market Online