Vale 2021 iron ore output rose 5% on year as post-Brumadinho curbs eased

Vale's iron ore fines production in 2021 totaled 315.6 million mt, up 15.2 million mt, or 5%, from 2020, with the easing of some restrictions imposed on the company's operations following the Brumadinho tailings dam collapse in January 2019.

The strong benchmark price environment, with average prices up 47% year on year was also a driver of 2021 production and sales, it said.

Vale ended the year with around 340 million mt of iron ore production capacity and expects to achieve 370 million mt/year capacity by the end of 2022, after the ramp-up of the tailings filtration plants at Itabira and Brucutu sites and their respective additions in tailings storage capacity (Itabiruçu and Torto dams) during the second half of the year, it said in a production report published late Feb. 10.

Output increased by 17% on the year in the operations in Minas Gerais – the state where both Vale's 2019 Brumadinho and BHP's 2015 Samarco tailings dam accidents occurred -- but this was partially offset by an 11% fall at Vale's major S11D mine in its northern Brazil system, it said.

The higher 2021 output was achieved mainly by a resumption of activities at Serra Leste mine in late 2020; higher output of high silica products at Brucutu mine; improved performance at the Itabira complex, despite restrictions related to tailings disposal; Timbopeba operating with six beneficiation lines since March 2021; resumption of wet processing production at Fábrica, together with the production of high silica products; and higher third-party purchase, Vale said.

These improvements were partially offset by S11D's performance, mainly impacted by the higher strip ratio and lower mining productivity during the year, caused by higher incursion of jaspilite materials in the ore body; and run-of-mine availability in Mutuca, which is under a licensing process.

In order to improve S11D performance towards its nameplate capacity, leading to a production of 80-85 million mt in 2022, Vale is sequentially installing four primary crushers and four mobile crushers to process jaspilite materials, all of them to be operational throughout H1 2022, it said. In addition, a new crusher is required to process large compact waste blocks, restricting S11D production capacity on around 5 million mt/year until it is operational by 2025.

January 2022 rains

All operations in Minas Gerais affected by the heavy rains in January have resumed their regular activities after the re-establishment of adequate safety conditions, the company said. The impact of these stoppages was to reduce Vale's iron ore production by around 2 million mt, but still does not change the company's production guidance because it takes the seasonal impact of the rainy season into account.

Vale's pellet production totaled 31.7 million mt in 2021, up 2 million mt from 2020, as a result of the resumption of the Vargem Grande pellet plant in January, but was still restricted by pellet feed availability at Itabira and Brucutu, the company said. This availability should gradually improve towards the end of 2022 following the startup of the Torto dam and work at the Itabiruçu dam. Sales volumes of iron ore fines and pellets totaled 309.8 million mt in 2021, up 23.7 million mt from 2020 and in line with 2021 production, it said.

S&P Global Platts assessed the 62% Fe Iron Ore Index at $150.15/ dry mt CFR North China on Feb. 11, down $3.60/dmt from Feb. 10. The price has risen 25.6% year to date, primarily on tight supplies.

Jefferies analyst Chris LaFemina said in a Feb. 11 note that he expects iron ore prices to decline in the near term following the very strong recovery over the past three months as supply ramps up in the second and third quarters and Chinese demand stays relatively weak.

"The outlook thereafter is arguably improving as a result of Chinese credit growth and a more manageable COVID situation globally," LaFemina said. "The two major risks to mining this year are the risk of a hard landing in China and the risk of a Fed policy mistake leading to much weaker than expected global growth."