Heavy rainfall disrupts iron ore operations at three Brazilian producers

Heavy rains in Minas Gerais state in southeastern Brazil -- reportedly higher than the seasonal average for the current rainy season -- have led to a partial stoppage of both iron ore production and transport at major producer Vale, and a suspension of iron ore mining at steelmakers Cia Siderurgica Nacional, or CSN, and Usinas Siderurgicas de Minas Gerais, the companies said Jan. 10.

Market sources told S&P Global Platts that a dyke had overflowed at steel pipemaker Vallourec's Pau Branco 5 million mt/year iron ore operation, also in Minas Gerais. A local press report in Noticias de Mineracao Brasil informed of evacuation of residents and a blockage of a local highway. Vallourec did not confirm any disruption early Jan. 10.

Vale did not state its exact current level of production or transport and indicated it did not expect the partial stoppage to affect its iron ore production guidance of 320 million-335 million mt for 2022. "The Northern System continues to operate in line with the production plan, which considers the seasonal impact of the rainy season on all operations," it said in a statement.

Market prices did not respond to the news early Jan 10.

S&P Global Platts assessed the 62% Fe Iron Ore Index at $125.45/dry mt CFR North China on Jan. 10, down $1.85/dmt from Jan. 7, as seaborne iron ore prices extended losses Jan. 10, as restocking demand continued to falter.

However, given the strict rules and guidelines under which Brazilian iron ore miners must now operate to preserve tailing dams safety, uncertainty now surrounds Brazilian production and shipment levels for the near future.

The duration of impact on mines and logistics depended on future rainfall level, with the rainy season due to last until at least March. Notably both the BHP-Vale Samarco dam burst in 2015 and the Vale Brumadinho 2019 burst occurred during the late November-late March rainy season.

Platts' cFlow trade-flow analytics software had already showed a 12% year-on-year drop in Vale's shipment volume in December 2021.

Vale halts Brucutu, Mariana

Vale said in a statement it has "partially halted the trains service on the Vitória a Minas railway (EFVM) and production in its Southeastern and Southern Systems to guarantee the safety of its employees and communities and due to the heavy rainfall level in Minas Gerais."

In the Southeastern System, the EFVM has been halted on the Rio Piracicaba - João Monlevade stretch, preventing dispatch from the Brucutu and Mariana complex, where production has been halted. The Desembargador Drummond - Nova Era stretch was also halted, but activities there are now being resumed and this did not impact production from the Itabira complex, it said.

"In the Southern System, due to the interdiction on stretches of the BR-040 and MG-030 highways, the safety of employees/third parties' transit and the mining fronts infrastructure, production at all the complexes is temporarily halted," Vale continued. "Vale is taking all the necessary measures to resume activities, focusing on the necessary precautions to ensure the safety of employees and communities located nearby its structures."

Monitoring dams

Vale said it continues to monitor the rainfall scenario in Minas Gerais and monitor its dams 24 hours a day, in real-time, through Geotechnical Monitoring Centers. There was no change in the emergency level in any of its structures, which are permanently monitored by inspections, maintenance, radar, robotic stations, video cameras and instruments such as manual and automatic piezometers, it stated.

CSN and Usiminas

CSN, one of Brazil's largest integrated steelmakers, and its mining subsidiary CSN Mineracao, said in a joint statement that "due to intense rains recorded in the southeast region of Brazil in recent days, the extraction and movement operations at the Casa de Pedra mine were temporarily suspended, with the expectation of returning its activities in the coming days."

Also due to the rains, ore loading operations at CSN's TECAR Coal Terminal at Itaguaí port in Rio de Janeiro state have also been suspended due to the high degree of humidity verified at the site, the companies said.

"The companies will take all necessary measures to maintain operations, respecting the necessary concerns to ensure the safety of employees and communities, and expect gradual resumption of activities as soon as weather conditions permit," they said.

CSN produced 10.4 million mt of iron ore in the third quarter of 2021.

Usiminas stated that due to intense rains in the region of Itatiaiuçu, Minas Gerais state, "significantly higher than the historical average", the operations of its subsidiary Mineração Usiminas S.A. (MUSA) were temporarily suspended.

"Activities shall be resumed upon improvement of weather conditions which allow safe access to the mines and proper functioning of equipment, as well as after a review of the general conditions of the facilities," it said.

The suspension will not, however, affect the supply of raw material to Usiminas, and MUSA's own stocks will be used for the supply, it added.

Usiminas added that due to the heavy rains in the region, on Jan. 8 MUSA activated level 1 of the Emergency Action Plan for Mining Dams for its Central Dam, which has been deactivated since 2014.

Level 1 means an initial state of alert and does not represent a compromise in the dam's safety factors, nor does it require the removal of residents from risk areas nor the sound of sirens, the company clarified.