The Corrego do Feijao dam burst on Jan. 25 is the second such disaster at Vale SA operations since Nov. 5, 2015, when Samarco Fundao dam failed. We assess the market scenarios that may develop in this fast-moving situation and conclude that the market will be balanced by marginal Chinese operations. In the immediate aftermath, the disaster added US$15/t to spot prices for 62% Fe iron ores, while the company's share price went from trading at an industry premium to eroding all gains made since Jan. 1, 2018.
From the supply chain side, S&P Global Market Intelligence Panjiva data shows Brazil’s total iron ore exports average 32.1 million tons per month in the 12 months to Nov. 30, so while the outage will be disruptive it may prove manageable.
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