Brazilian iron ore producer Vale has maintained its annual output guidance of 310mn-330mn t after a court ordered it to suspend mining at its 36mn t/yr Itabira complex in Minas Gerais to combat a growing Covid-19 outbreak.
Vale suspended operations at Itabira's Conceiçao, Caue and Periquito mines in compliance with a [5 June decision] issued by the regional labour court of the third region that reinstated the interdiction term issued by Minas Gerais labour officials, Vale said on 6 June.
The suspension may result in temporary shortage of pellets for the domestic market as the Itabira complex provides pellet feed to the Tubarao complex, Vale said.
"Considering the expected monthly production of 2.7mn t from the Itabira complex for the coming months and the provisioning of up to 15mn t of losses associated with Covid-19 in 2020, there is no need, at this moment, to revise the guidance," Vale said.
The ruling will remain in effect until a court rules on the merits of the interdiction or until Vale implements control measures for Covid-19 as set by labour inspectors, Vale said. It faces a daily fine of 500,000 real ($100,800) for non-compliance.
The Itabira complex, in Vale's southeastern system, accounted for 36mn t, or 12pc, of the company's 302mn t of fines production in 2019 and 6mn t of Vale's 59mn in the first quarter.
Seaborne iron ore prices have been supported this year largely because of the persistent supply disruptions from Brazil, caused by dam-related closures, record rainfall and Covid-19-related disruptions.
Market participants have highlighted the risks to Vale's ability to meet its production guidance for the year because of the disruptions, while at the same time global steel production cuts and iron ore diversions to China have offset some of the supply cuts.
Argus 62pc Fe iron ore prices rose back above $100/dmt on 5 June, with the 65pc Fe fines index moving up to $115/dmt on the same day amid tight port inventories in China and persistent supply woes.
Dalian commodity exchange September iron ore futures rose over 790 yuan/t ($111/t) soon after their 9am opening today, up from a close of Yn760/t at the end of the 5 June night session.
| Vale iron ore output, sales (mn t) | ||||
| 1Q '20 | 2019 | 2018 | % change | |
| Northern System | ||||
| Northern and Eastern ranges | 21.5 | 115.4 | 135.6 | -14.9 |
| S11D | 18.4 | 73.4 | 58.0 | 26.4 |
| Total | 39.9 | 188.7 | 193.6 | -2.5 |
| Southeastern System | ||||
| Itabira (Caue, Conceicao and others) | 6.0 | 36.0 | 41.7 | -41.9 |
| Minas Centrais (Brucutu and others) | 3.6 | 25.9 | 36.0 | -28.1 |
| Mariana (Alegria, Timbopeba and others) | 2.1 | 11.3 | 26.7 | -57.6 |
| Total | 11.8 | 73.1 | 104.4 | -29.9 |
| Southern System | ||||
| Paraopeba (Mutuca, Fabrica and others) | 3.6 | 36.0 | 41.7 | -41.9 |
| Vargem Grande (Vargem Grande, Pico and others) | 3.7 | 25.9 | 36.0 | -28.1 |
| Total | 7.4 | 37.7 | 84.1 | -55.2 |
| Midwestern System | ||||
| Corumba | 0.6 | 2.4 | 2.5 | -4.0 |
| Total fines production | 59.6 | 302.0 | 384.6 | -21.5 |
| Total fines sales | 51.7 | 269.3 | 309.0 | -12.8 |
| Total fines and pellet sales | 59.0 | 312.5 | 365.6 | -14.5 |
| Vale output guidance (mn t) | ||||
| Adjustments | Target | |||
| Original | 355.0 | |||
| 1Q production miss | -8.0 | |||
| 2Q Northern restrictions | -3.0 | |||
| Timbopeba/Fabrica delays | -7.0 | |||
| Brucutu at 80% 2H | -6.0 | |||
| Upper range | 330.0 | |||
| Brucutu at 40% 2H | -6.0 | |||
| Potential Covid-19 impacts | -15.0 | |||
| Lower range | 310.0 | |||
| Source: Vale | ||||
