Fears for third Vale dam spur iron ore price rise
Iron ore prices have topped the $US100-a-tonne mark on concerns over a third Vale dam failure.
Benchmark iron ore prices crossed the $US100-a-tonne mark for the first time in five years on Friday evening as Vale warned it was facing the risk of a third tailings dam failure, potentially extending disruptions to its Brazilian operations.
Shares in Australian iron ore miners shot up ahead of price breaching the $US100 mark on Friday, with Fortescue Metals briefly crossing $9 a share before closing up 55c, or 6.6 per cent, at $8.95. Rio Tinto again surged above $100 a share to close up $2.07, or 2.1 per cent, at $101.35, while BHP was up 92c, or 2.5 per cent, at $38.46.
Mineral Resources climbed 39c, or 2.6 per cent, to $15.69 and Mount Gibson Iron — which just returned to shipping ultra-high-grade Koolan Island ore this month — was up 0.5c, or 0.4 per cent, at $1.255.
Vale’s Thursday night announcement does not affect its existing operations as the Gongo Soco mine, 65km from the Brumadinho dam collapse that killed more than 230 people, has been closed since 2016. But the latest concerns will loom large over Vale’s efforts to win legal permission to open other operations, such as its 300 million-tonne-a-year Brucutu operation.
The benchmark price of 62 per cent iron ore was trading at just over $US100 a tonne on Friday night and is likely to rise further after frenzied futures trading on the Dalian exchange pushed active iron ore contracts to their highest levels since mid-2010.
Share prices of local iron ore miners were further buoyed by positive signs out of Chinese steel mills, with JPMorgan analyst Lyndon Fagan saying China’s 85 million-tonne April steel output was up 11 per cent year-on-year, and represented the first time the country’s steel mills had cracked the billion-tonne-a-year annualised rate.
“China’s steel output is surprising on the upside at a time when iron ore shipments remain materially affected by supply disruptions in Brazil and, to a lesser extent, Australia,” he said in a client note on Friday. “In our view, iron ore prices are likely to remain very well supported over the next three to six months. The key downside risk remains potential China domestic supply restarts.”
On Thursday night Vale warned Brazilian prosecutors a dam was at risk of rupturing at its Gongo Soco mine, saying it had detected movement in the embankment of a nearby mine pit that could herald the collapse of a dam wall within a week.