Brazilian mining sector outlook murky after Vale dam accident

The outlook for the Brazilian mining industry has become very murky following a major accident in one of Vale’s mines and the consequent increased scrutiny on operations by authorities, according to analysts.

After Vale, the world’s largest iron ore producer, announced it would be taking40 million tonnes per year (tpy) off its output to decommission older tailings dams, local regulators cancelled the license for an additional dam used in an unrelated mine, cutting a further 30 million tonnes annually. “Previously, our impression was that this would be a matter of a couple of weeks to resolve,” Brazilian bank BTG Pactual’s analysts Leonardo Correa and Gerard Roure wrote in a report on February 6. “Now that call is less likely [to materialize].” The permit cancellation led Vale to declare force majeure on some iron ore and pellet contracts. Part of the production volumes was meant for exports, but local customers were also hit by the move. “According to our channel checks, some Brazilian pig iron and steel producers are already concerned about having to reduce capacity utilization due to scarce iron ore availability,” analysts Marcos Assumpção, Daniel Sasson...

Published

Renato Rostás

February 12, 2019

08:20 GMT

São Paulo