Torrential rains in Brazil paralyzed the iron ore industry

The price of iron ore jumped on Wednesday as heavy rains disrupted the iron ore industry in southeast Brazil. At the same time, Vale stopped its operations, and regulators were sent to monitor the impact.

On the exchange, iron ore futures rose 1.9%. The 62% iron benchmark fine imported to northern China changed hands at $133.68 a tonne during morning trading, up 3.5% from Tuesday's close, according to Fastmarkets MB.

Partially suspended the Estrada de Ferro Vitoria a Minas Gerais railway, as well as production on its southeastern and southern systems, "to guarantee the safety of its employees and the public," the company said in a statement on Monday

Gerdau S.A., Cia. Siderurgica Nacional SA and Usinas Siderurgicas de Minas Gerais SA also suspended operations in the state of Minas Gerais this week.

While the region accounted for 40% of Vale's production in the nine months to September, the company reiterated its production guidance of 320 million to 335 million tonnes in 2022. According to analysts, production may now be at the lower end of the range.

Regular operations continued in the northern system, where Vale produces 60% of its total annual iron ore.
In December, Brazil recorded 40 tailings at emergency levels, 36 of which are in the state of Minas Gerais, according to the country's mining regulator. Three of them - all owned by Vale - are on high alert Level 3.

"Iron ore spot prices are expected to remain stable," Mysteel Research & Consulting said in a note, citing higher blast furnace activity, mill restocking and supply disruptions from Brazil.

“Production shutdowns and increased security risks are moderately negative for Vale, CSN and Usiminas, but prolonged flooding that disrupts mining and logistics operations for an extended period is likely to reduce their production volumes and therefore cause more significant damage to cash flows and revenues. Moody's said in a note.