Water crisis threatens Brazilian iron ore transportation

Drought makes one of Brazil's most important river systems non-navigable, making it more difficult and costly for a raw material power plant to transport grain and iron ore to world markets.

According to the national grid operator, the Parana River Basin in central Brazil is experiencing its worst water crisis in 91 years, with June runoff accounting for 55% of the historical monthly average, dropping to its lowest level on record. South America's second largest river system provides electricity and water to the industrialized south of Brazil and maintains river levels in neighboring countries where drought has also made navigation difficult.

The ramifications of water scarcity in Brazil extend far beyond the Latin American country: retreating waterways are causing supply chain disruptions and bottlenecks in Argentina, the world's largest shipper of soybean meal, and Paraguay. Brazil is the largest exporter of soybeans, coffee and sugar, and the second largest supplier of corn and iron ore.

Below average rainfall for the second year in a row is creating bottlenecks on the Paraguay-Parana waterway, which is being used by iron ore giant Vale SA as a cheaper alternative to road and rail. Shipments are the lowest since the Brazilian shipping agency known as Antaq began collecting data in 2010.

Vale said it uses shallow draft vessels on the river and transports the ore by road and rail in a safe and legal manner to reach customers in Brazil and abroad.