Brazil is the world’s second largest iron ore producer and exporter after Australia. However, since the start of 2019, production has suffered due to the Brumadinho tailings dam disaster, weather-related conditions and the spread of Covid-19.
In 2019, overall output of iron ore was 404.9Mt, a fall of 12%, primarily due to the collapse of the Brumadinho tailings dam in January 2019, which caused the deaths of 270 people. Production from the country’s largest producer, Vale SA, was down by 21.5% year-on-year, with the company having to shut down several mines in February 2019 due to safety concerns following the disaster. These included the Vargem Grande and Paraopeba (Feijao) mining complexes in the southern system, and Brucutu, Alegria and Timbopeba mines in the southeastern system, with the two systems accounting for approximately 40Mt/year and 52.8Mt/year of capacity respectively. As a result, the lower ore production reduced the country’s exports volumes by 12.6% in 2019, versus 2018.
In Q1 2020, production disruption occurred due to the Covid-19 outbreak, along with the production losses of around 4.5Mt in the northern system, unscheduled maintenance at the SD11 complex, worse-than-expected weather conditions, a delay to the start of the Morro1 mining section and an operational loss of 2.1Mt in the southern system. This reduced Vale’s production to 59.6Mt for the quarter, compared with a guidance of 63-68Mt. Looking ahead, production is expected to remain subdued due to a delay in the restarts of operations at the Timbopeba and Fabrica mines within the Mariana complex due to the Covid-19 pandemic.
In addition, in April 2020, Brazil’s National Mining Agency (ANM), announced a halt to operations at 47 mining dams whose operators failed to certify their stability; 25 of which are owned by Vale SA. Despite these challenges, the country’s overall output is expected increase by 3% to 417Mt in 2020, with a resumption of around 40Mt of stalled capacity, which was closed in the previous year. However, despite this growth in production, bad weather conditions and reduced demand from China expected to lead to a fall in exports of 4.6% to 324.8Mt by 2020.
By 2024, however, Brazil’s production and overall exports are expected to grow steadily to reach 498.3Mt and 359.7Mt respectively, equivalent to CAGRs of 4.5% and 2.6% from 2020-2024. The growth in the production will be mainly supported by number of upcoming iron ore projects within the country. These include the Bamin mine in Bahia, which will have an annual saleable production capacity of 20Mt and the Jambreiro project in Minas Gerais, which is a low-cost project with an annual iron ore production capacity of 1Mt. Meanwhile, export growth will be supported by improved Chinese demand for Brazil’s iron ore.