Asian seaborne iron ore swaps climb after railway disruption in South Brazil

Singapore — Asian seaborne iron ore derivatives rose on Wednesday led by heightened supply disruption concerns from Brazil due to bad weather.

Iron ore 62% Fe February swaps listed on the Singapore Exchange rose $1.45/dmt from 5:30 pm Singapore time on Tuesday to $84.90/dmt as of 2 pm in Singapore.

Market sources said they had heard of two rail disruptions in southern Brazil due to heavy rainfall, which could further disrupt exports.

A company source from Vale, however, could not confirm the news.

"The company will communicate through its official channels -- press releases, website and etc if there is an event that affects operations," the source said.

Trade sources said they heard that the Vale-operated Vitoria-Minas Railroad, or EFVM, which connects the state capitals of Minas Gerais and Tubarao, has stopped operations since January 24.

The other railroad in question, the Malha Regional Sudeste, or MRS rail, that connects the seaports of Rio de Janeiro, Itaguai and Santos, had experienced disruptions since January 27.

A market source estimated that 280,000 mt of iron ore exported on a daily basis could be affected.

Another source expected further pressure on southern Brazilian supply as heavy rains over the past few weeks had already made a significant impact on export volumes.

Iron ore volumes from Tubarao have been under 1 million mt per week since the start of the year and should issues regarding the railway be sufficiently serious, iron ore volumes could drop to levels far worse than after the dam accident, the source added.

Export data seen by Platts showed that the average weekly output from Vale's Southern System ports in 2019 were around 1.9 million mt in comparison with the first four weeks of 2020, which averaged at 1.02 million mt.