Last week, Brazil surpassed the United States in the number of new cases of coronavirus, and the disease is currently spreading in the northern states, such as Pará, which account for 8% of the world's iron ore supplies. In April, Vale cut its supply due to bad weather and the impact of the virus on work.
“The problems with the supply of Covid-19 mines in Latin America have not yet been resolved,” said Vennie Yao, senior commodity strategist at ING Bank, by telephone from London. "Chile is now a big suspense."
So far, mining companies such as Vale and Codelco have been able to continue working during the outbreak, taking safety measures without compromising performance. Other mines in the region that have been closed are now reopening. But industries have helped relatively low incidence rates among the general population. This is no longer the case.
“The outbreak of Covid-19 in Brazil poses significant risks to iron ore supplies in the coming weeks, even though mining is allowed for business,” wrote analysts at Citigroup Inc., including Tracy Liao. "Growing infections among workers may prompt miners or local authorities to introduce more draconian quarantines that could limit productivity or even close mines."
Meanwhile, port iron ore reserves in China continued to decline, and demand for steel in China improved markedly over the past two months, reflecting a reduction in reserves. Although prices may remain higher for longer, Citigroup maintains a bearish outlook, predicting that prices will drop to $ 70 per ton by the end of 2020, and Vale is expected to handle this outbreak well.
In response to questions, Vale confirmed the annual production forecast of 310 to 330 million tons, which takes into account pandemic risks, such as a higher absenteeism rate and the possibility of tightening restrictions in Brazil. The company also offered financial support for its supply chain and the import of medical equipment for the regions where it operates. Like Codelco, Vale has implemented measures for social removal, disinfection of workplaces, inspection and testing.
