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Local authorities granted permission for Pau Branco, located in southeastern Minas Gerais state, to operate for three months without usage of the waste pile, and Vallourec is aiming to progressively increase capacity usage from 70% to 100% under those terms.
The company will seek authorization to use the waste pile again in the future, after conducting studies about stability.
“Since the incident in January, [Vallourec] has been engaging with an external auditor for a full restart of the mine, which is subject to validation of the stability of the waste pile by the mining and state environmental authorities,” Jefferies’ analysts Alan Spence and Christopher LaFemina wrote in a report on Wednesday.
Amid historically high rainfall in Minas Gerais, material from Pau Branco’s waste pile slid into the Lisa rainwater dam on January 8, causing its water to overflow and interrupt a nearby highway. Following judicial decisions, authorities then forced the company to stop tailings disposal and take precautionary measures.
The heavy rains in the region also caused other companies, such as Vale, Usiminas and Companhia Siderúrgica Nacional, to suspend operations. This resulted in a significant volume drop for iron ore exports from the country in both January and February.
Seaborne iron ore prices hit their 2022 high in March, right after those two weaker months of Brazilian supply and amid growing Chinese demand. The market has since softened due to recovering supply, Covid-19 lockdowns in China and expectations for new steel capacity restrictions in the country.
Fastmarkets’ index for iron ore 65% Fe Brazil-origin fines, cfr Qingdao was calculated at $168.70 per tonne on Wednesday, down 0.41% from $169.40 per tonne on April 29, and down 12% from $191.70 per tonne on March 7 – the 2022 high.
Vallourec’s Pau Branco mine has capacity to produce 6 million tonnes per year of iron ore and it mostly supplies the company’s own steel mills in Brazil. Tailings disposal has been made via dry stacking with a press filter since 2015.