Preliminary expectations of a limited impact on iron ore prices resulting from the collapse of Vale’s iron ore waste dam have been reconsidered by analysts in view of recent developments. The accident at first was expected to affect only 2.5 percent of Vale’s iron ore production, but the Brazilian government has forced Vale to close all dams considered to have a similar risk, affecting a total of 10 percent of its iron ore production. Included in the closures is Vale’s Brucutu mine, the largest in the state of Minas Gerais, which is responsible for an estimated annual production of 30 million mt of iron ore, equivalent to 7.5 percent of the company’s production expected for this year.
Considering the newly announced production cuts, iron ore prices have increased in the Chinese spot market, resulting in sinter feed fines in Brazil returning to a level last seen in March 2018. Analysts believe that iron ore prices did not increase further due to low activity in the Chinese market, due to current celebrations for the New Year holiday.
Since last week, iron ore prices in Brazil have increased on average by $9/mt, which also accounts for a slight decline in ocean freight rates, which positively affected prices in FOB terms.
Sinter feed fines of 65 percent iron contents are now estimated to be traded for export from Brazil at $71/mt, the equivalent lumps $93/mt and blast furnace grade pellets at $139/mt, FOB conditions.
In the Brazilian domestic market, for equivalent ores, the prices would be $65/mt for sinter feed fines, $87/mt for lumps and $133/mt for blast furnace grade pellets, ex-works, no taxes included.