Vale Iron-Ore Mine Halt Risks `Incremental Supply Shock’ – by R.T. Watson (Bloomberg News – February 4, 2019)

Vale SA said it’s temporarily halting some operations at its Brucutu mine, potentially causing a production loss of about 30 million metric tons of iron ore a year — a move that an analyst said could cause “incremental supply shock.” Iron ore in Singapore climbed.

The move is in compliance with a Brazilian court order issued to help improve safety after one of Vale’s tailings dam in Minas Gerais state collapsed in late January, killing more than 130 people and leveling part of a town.

The output cut is on top of the planned 40 million ton curbs that the company will implement as it decommissions dams similar to the one involved in the fatal accident.

“This would be an incremental supply shock to the iron ore market and would support prices at higher than expected levels,” Jefferies LLC analysts including Christopher LaFemina said in a note Monday.

The market has already been jolted by the earlier announced output cuts. Iron ore prices have climbed since Jan. 25, when the Vale dam broke, on speculation the world’s largest miner of the steelmaking ingredient could face stricter regulations, crimping supply. Futures in Singapore rose 4 percent in thin trading on Tuesday, after a 14 percent surge last week.

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