BEIJING: Iron ore futures leapt on Thursday, after Vale SA released lacklustre annual production figures, as the Brazilian mining giant struggled to boost output due to operational constraints as a result of the pandemic and a dam disaster two years ago.
The 2019 deadly tailings dam collapse at Vale’s Corrego do Feijao mine that led to restrictions on mining activities in Brazil - the world’s second-largest iron ore supplier - resulted in a tight global supply that added upward pressure on prices last year, driven higher mainly by China’s robust demand.
Iron ore on China’s Dalian Commodity Exchange ended daytime trading up 5.3% at 991 yuan ($153.41) a tonne, after two days of losses.
On the Singapore Exchange, the steelmaking ingredient vaulted 5.2% to $154.50 a tonne by 0720 GMT.
Vale reported a 0.5% decline in 2020 iron ore output to 300.4 million tonnes, at the bottom of its guidance of 300-305 million tonnes, though it flagged a potential rebound in both output and sales this year.
It suffered a 5% quarter-on-quarter decline in output due to higher rainfall levels and tailings disposal restrictions.
“The Brazilian producer has been struggling to raise output following the virus-related restrictions last year,” said ANZ senior commodity strategist Daniel Hynes.
“They are also behind schedule in getting safety approvals for dams following the disaster.”
Vale’s challenges tempered optimism over prospects for Brazil’s shipments this year, underpinned by data showing higher January exports.
Spot iron ore also stood firm, supported at above $150 a tonne on hopes for strong steel production outside China.
A report that China’s central bank will keep liquidity reasonably ample to support economic recovery also buoyed sentiment.
Rebar on the Shanghai Futures Exchange rose 2%, hot-rolled coil climbed 1.3% and stainless steel gained 0.7%.