The global iron ore trade may be disrupted after Vale SA, the largest producer, was ordered by a Brazilian court to temporarily close one of its main ports following alleged environmental breaches. Prices of the raw material gained along with miners’ shares.
The court in Brazil’s Espirito Santo state ordered a halt to export and import activities through Tubarao after elevated levels of iron ore and coal dust were detected.
Vale received the news from federal police “with surprise” and will use “all appropriate legal measures to ensure the re-establishment of its activities,” its said in a statement Thursday.
Iron ore has plunged over the past three years as the world’s top producers including Vale and rivals BHP Billiton Ltd. and Rio Tinto Group in Australia boosted low-cost supply, spurring a glut just as China’s growth cooled.
The impact from Tubarao would be determined by the duration of any closure and how the legal case developed, according to Citigroup Inc., which estimated that the facility handled about 110 million tons of ore a year. That’s about 8 percent of global shipments, according to Bloomberg calculations.
Should there be a halt of several weeks, “you would see a very significant reaction,” Citigroup analyst Ivan Szpakowski said in Hong Kong.
Still, “you’ve had one or two instances in the past where Brazil has ordered ports temporarily shut but companies have been able to get an injunction for operations to continue while the legal case is under further review. If that happens, it won’t actually affect the market from a fundamental standpoint.”
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