Chinese iron ore futures tumbled as supply concerns lightened after Vale received a green light to resume operations at its Brucutu mine.
While Vale (NYSE:VALE) received a green light to resume operations at its Brucutu mine on Tuesday (March 19), Chinese iron ore prices took a tumble as supply concerns lightened.
After a deadly dam disaster at Vale’s Córrego do Feijão mine in Brazil in late January, the company hit several blockades affecting its production capabilities. In early February, Vale was court ordered to halt all activities at Brucutu, a mine that produces 30 million tonnes of iron ore annually.
On top of that, the company was also ordered to pause all operations at its Timbopeba mine just last week, taking an additional 12.8-million-tonne chunk out of Vale’s iron ore production.
However, clouds began to clear for Vale on Tuesday when the company announced it had been authorized to resume operating at Brucutu and at its Laranjeiras tailings dam by a local court.
Though the company still needs approval from a Brazilian environmental authority to officially restart operations, the road to recovery for Vale is becoming clearer.
“It is not clear to us whether a restart is now imminent […] If this mine does come back online, it would alleviate some of the expected tightness in the iron ore market,” Jefferies analysts said in a note obtained by Reuters.
Although the news came as a positive sign for Vale, iron ore futures on the Dalian Commodity Exchange (DCE) took a tumble from the re-emergence of a significant supplier.
The DCE’s iron ore contract with the most volume saw drops as big as 5.65 percent on Wednesday (March 20), but eventually simmered to a 3.6-percent drop, settling at 613.5 yuan.
On Wednesday, Vale’s share price hit a small snag by 3:20 p.m. EST, dropping 1.06 percent to US$13.55 on the NYSE.
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.