I said recently that iron ore was not going to go to $300 unless we saw some new crisis to supply. Either another busted dam in Brazil or nationalist Indian policy or the like. Well, we have a candidate, via Reuters:
- Regional Labor Department for the southeastern Brazilian state of Minas Gerais says Vale SA’s decomissioned Xingu dam is at “imminent risk of collapsing.”
- Vale denies it but has suspended roughly 12mt of production as it clears out.
The Regional Labor Department said in the statement on Wednesday that the area was closed after a request for documents on April 27 and an inspection on May 20. The company will have to take various technical measures to get permission to reopen the area.
“Documents presented by Vale show the Xingu dam is not stable (…), presenting a significant risk of collapse”, the surveillance group said.
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“The situation is extreme and puts workers at risk.”
Engineers and technicians told the auditors that the tailings at Xingu had not been properly drained and had been deposited in the dam in an uncontrolled manner.
“It is possible there has been more granular material deposited together with layers of fine (non-draining) material”, the statement added, boosting pressure on the dam in certain places in a way similar to conditions at Brumadinho.Vale asked on May 27 for the area to be reopened, but the request was denied.
If the dam were to burst then iron ore might have one final shot at $300 on sentiment before the price collapses again.
In the meantime, it is enough suspended production to support a little bid.