Heavy rainfall in southeastern Brazil has prompted
miners including Vale SA to suspend some operations, they said on Monday, after
downpours caused deadly floods in the northeast and threatened to delay
harvests in the midwest.
Rainfall is expected to remain heavy this week in
most of top mining state Minas Gerais, after runoff closed roads and railways.
The rains may also have contributed to the dramatic
collapse of a canyon rock face in the state on Saturday, killing 10 people
visiting a waterfall on boats.
In the northeastern state of Bahia, flooding displaced about 50,000
families and killed some two dozen
over the holidays.
Vale said on Monday it has partially suspended
operations at its Southeastern and Southern iron ore systems due to the bad
weather, but reaffirmed its 2022 production target as the Northern system was
Brazilian steelmakers Usiminas and Companhia
Siderurgica Nacional (CSN) also halted operations of their mining units.
Over the weekend, France’s Vallourec paused its Pau
Branco mine after heavy rainfall caused a dike to overflow.
“We see the news as potentially negative for the entire
mining sector, as it could result in new regulations to suspend existing
operations or delay new projects,” analysts at XP Investimentos said in a
BTG Pactual analysts said economic impacts could be
muted if normal operations are restored quickly, but noted it all depends on
how long the heavy rainfall will last.
“We estimate there could be more than 100 million
tonnes of annualized iron ore supply at risk at this stage in Brazil, which is
a relevant number (roughly 7% of seaborne supply and about 30% of Brazilian
supply), so clearly the stakes are high and we could see impacts on short-term
iron ore movements,” they said.
Interrupted railways, closed
Vale said in a securities filing that train
circulation at its Vitoria-Minas railway was partially interrupted by the
rains, halting output at the Brucutu mine and the Mariana complex due to a lack
Both mines are part of Vale’s Southeastern system,
along with the Itabira complex, where production was not affected.
In the Southern system, Vale said all of its
complexes had to halt production because key highways BR-040 and MG-030 were
Vale said its Northern System is still operating as
planned, and maintained its 2022 iron ore production forecast at 320-335 million
tonnes. It noted its production plan takes into account the seasonal rainfall
The miner also said the rains had not changed the
alert level for any of its tailing dams which are under constant, “real-time”
“While Vale did not change its production guidance
for 2022, we believe that the market could start to project volumes closer to
the low end of the range,” Itau BBA analysts said, noting that iron ore prices
could be supported at their current high levels.
Vale’s two halted operations accounted for about 31%
of its output in the first nine months of 2021, the Itau BBA analysts said. A
two-week halt in these operations could represent an impact of about 3 million
tonnes for the company, according to their preliminary calculations.
Steelmaker Usiminas announced a stoppage at its
mining subsidiary Mineracao Usiminas (MUSA) due to weather, but said it had
enough inventory of raw material to avoid disruption.
The company also said its Barragem Central tailings
dam, which has been inactive since 2014, reached alert level 1 – an initial
warning that does not mean a safety breach was noted.
CSN and its steel mining subsidiary CSN Mineracao SA
announced a halt to operations of the Casa de Pedra mine, but said they are
expected to resume in coming days.
They said port operations at the Itaguai coal
terminal, located in the neighboring state of Rio de Janeiro, were also
suspended due to excessive rains.
On Sunday, Brazil’s regulatory National Mining Agency
(ANM) suspended operations at
French steel pipe maker Vallourec’s
Pau Branco iron ore mine in the state after a dike overflowed, cutting off a
federal highway. There were no reported injuries.
“After the dam incidents of the past, we welcome the
zero tolerance approach that miners are taking in the country to minimize
operational risks, which we consider the prudent approach,” BTG Pactual said.
(By Gabriel Araujo and Roberto Samora; Editing by