16-06-2018

Brazil trucker strike led to shifts in iron ore export flows; losses limited

The recent truckers’ strike in Brazil contributed to some shifts in iron ore export flows in May, which may continue into June, while limiting longer-term impact to volume, according to mining sources and government data.

The strike stymied activity across the nation and led to disruption in iron ore mining and exports, as well as hitting other commodities such as fuels and agriculture.

During the strike, iron ore miner Vale partly redirected its shipments from its private terminal at Itaguai port, in Rio de Janeiro state, to its terminal at Tubarao, in Vitoria port, Espirito Santo state.

Brazil’s trucker strike had a “limited impact” on Vale’s operations, the Rio de Janeiro-based company said by email this week.

“The company could monitor restrictions and offset it [with other plant operations],” Vale said.

Vale added iron ore mines are served by railway as well as by roads, “which reduces the company’s vulnerability” to any disruption from fuel and services.

“[Vale] transported starch for iron ore production through railways, something that company has never done before,” Vale said.

Iron ore shipments rose from Ponta da Madeira, Sao Luis port, in northeastern Brazil, which usually exports Vale’s 65% Fe IOCJ product from the expanding Carajas mining complex, according to Trade and Industry Ministry data.

The increase may allow for more higher grade fines, and may help meet demand for the BRBF blend, which combines northern with southern Brazilian fines, and is only available in Asia.

Volumes exported from Itaguai port in May fell to 7.84 million mt from 10.66 million mt in May 2017, while rising from 6.59 million mt in April, ministry data showed.

Itaguai hosts terminals operated by Vale and CSN, as well as Impala Terminals’ Porto Sudeste which exports iron ore from other miners. Ore volumes exported from Tubarao increased 44% to 13.64 million mt, from 9.48 million mt in May 2017 and also up from 6.78 million mt in April 2018.

At the site, Vale’s Tubarao II pellet plant was restarted in Q1, 2018, adding to the six other pellet plants in operation by Vale and partners, while southern and southeastern fines and feeds flow through the terminal site. In northeastern Brazil, Sao Luis port volumes rose 35% to 17.2 million mt in May from 12.73 million mt in May 2017. In April, Sao Luis exported 11.8 million mt.

Vale is responsible for roughly 80% of Brazil’s iron ore exports and due to seasonal factors, as rain hits operations more in the first few months of each year, typically exports more in the remainder of the year.

CONCLUSION

The 10-day independent truckers strike officially concluded in late May, while a longer-lasting pay deal remains to be settled. Since an earlier resolution was reached, the restocking of retail and fuel outlets has been prioritized, limiting faster normalization in trucking other goods.

The Brazilian iron ore production unit of Companhia Siderurgica Nacional on June 4 lifted its force majeure notice, a week after it was issued, citing a substantial reduction in the impact of the strike on its operations and supply chain.

The measure was precautionary, as the trucking strike may have affected its ability to meet customer shipments, although in the end there was no impact on sales and shipments, according to a source familiar with the situation.

CSN Mineracao said when it declared force majeure the impact on inland transportation had affected raw materials and other inputs supplied to its mines. But flexibility in the shipping chain and stocks limited shipment disruption based on the strike’s duration.

CSN supplies iron ore to its Rio de Janeiro state-based integrated steel mill and exports various iron ore grades to customers globally.

Brazil’s economy is heavily reliant on road transport, and the strike in May disrupted domestic deliveries of steelmaking raw materials to local producers and shipments of finished steel to domestic buyers, while exports and imports were backed up.

“It’s hard not to have had an impact in Brazil,” a source close to steel and mining operation in the country said. But the impact was lessened by the subsequent pace of recovery, he said. “Mining and other operations came on relatively quickly since.”

As Brazil’s truckers disrupted the markets, the iron ore market had been shaken up by the loss of pellet feed from Anglo American’s Minas-Rio mine since Q2, as well as a strike which lasted over two months in Canada at Rio Tinto’s IOC operation. The IOC strike took out supplies of high grade concentrate and pellets since end-march with shipments resuming this month.

Several iron ore suppliers expect more demand for alternative high grade iron ore as a result of these disruptions to supply.

“IOC being out was a bigger deal than the Brazil trucker strike,” for European pellet-focused iron ore markets, a source said.

As for prevailing contract volumes at iron ore suppliers, some shipments have been requested delivered in advance, with strong demand for pellets in Europe, according to market sources.

Source: Platts

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