Brazil's Vale is suspending activities at its Itabira mining complex, comprising the Conceição, Cauê and Periquito mines, in compliance with a court order compelling the company to close the site while it takes measures including full testing for COVID-19 of its employees at the site, the company said June 6.
The stoppage should not impact Vale's iron ore fines production guidance of 310 million - 330 million mt for 2020: however there may be a temporary shortage of pellets for the domestic market during the Itabira Complex shutdown, as this provides pellet feed for the pelletizers of the Tubarão Complex, it said.
The Itabira suspension is in response to a decision issued June 5 by the Regional Labour Court of the 3rd Region in Minas Gerais state, southeastern Brazil, which reinstated an Interdiction Term issued by the state's Sub-Secretariat for Labor Inspection, against which Vale had successfully obtained an injunction in late May.
The ruling will remain in effect until judgment on the merits of the action or until the labor inspectors are satisfied by the company's implementation of control measures to protect from COVID-19, and a daily fine of R$ 500,000.00 ($100,800.00) if the conditions are not met, Vale said in a statement.
Vale's iron ore fines production guidance of 310 million - 330 million mt in 2020 "considers a negative impact of 15 million mt from eventual impacts resulting from the fight against COVID-19," the company said. "Considering (i) the expected monthly production of 2.7 million million mt from the Itabira Complex for the coming months and (ii) the provisioning of up to 15 million mt of losses associated with COVID-19 in 2020, there is no need, at this moment, to revise the guidance."
The Itabira complex produced 35.9 million mt of iron ore in 2019. The Tubarao pelletizing complex is the largest such complex worldwide.
10-month high
Iron ore 62% Fe fines prices jumped to a 10-month high of $100.9/dry mt CFR North China May 29 when news of the court action to close the Itabira mines first broke, and have hovered around that level since, as fears of reduced supplies from Brazil have coincided with China's rising steelmaking rates after its COVID-19 restrictions eased.
Vale said that the shutdown of activities at these mines follows all technical criteria and safety protocols to protect the health of workers. It had previously "drastically reduced" the number of employees working at all its in complexes in order to maintain the necessary precautions, it said in a statement to S&P Global Platts.
The move to halt production at the Itabira mines was taken due to the high number of cases of COVID-19 in the region, and because it was feared the continuing operation of the mining complex could have a negative impact on health in the region, and by extension, the region's overall economic health, a spokeswoman for the 3rd Region's Public Labor Ministry, which filed the initial case against Vale, told Platts. Observers close to Vale have noted that there is strict enforcement of COVID-19 prevention measures in the mine sites and that any health problem is more likely to stem from the community areas rather than the mines themselves.
Vale said that up until June 5th, over 75% of the company's workforce (own and third parties) throughout Brazil had been tested for COVID-19 and that in Itabira, almost the entire workforce at site had been tested.
"Mass testing offers greater transparency of the number of Vale employees who had contact with the virus, which contrasts with the lower incidence in the surrounding communities, where there is no large-scale testing. Thus, the company will remain with the firm purpose of supporting the municipalities where it operates in the testing process, as is the case in Itabira, while keeping other measures such as the donation of 5 million tests to the Brazilian Government," it said in the statement. The company is financing a drive-through testing site in the town of Itabira, it said.
Brazil has in recent days reported a surge in the number of cases and deaths from COVID-19.
