Iron ore shortage after Vale disaster hurting Brazil steelmakers: report

FILE PHOTO: A helmet with a logo of Vale SA is seen in a collapsed tailings dam owned by the company, in Brumadinho, Brazil February 13, 2019. REUTERS/Washington Alves

SAO PAULO (Reuters) - A decision by Brazilian mining company Vale SA to halt production at ten sites in Minas Gerais state following a deadly dam disaster has affected deliveries of iron ore pellets to clients, newspaper Valor Econômico reported on Monday, citing industry sources.

Vale is trying to resolve the problem by bringing iron ore pellets produced in the northeastern state of Maranhão to clients in the southeast. The longer distances involved are adding to transportation costs, Valor said.

Vale did not immediately respond to a request for comment on the Valor report.

Privately owned Grupo Ferroeste told the newspaper its pig iron unit in Espírito Santo state has turned off a blast furnace affecting about 40 percent of the plant’s production capacity. Ferroeste did not immediately answer a Reuters request for comment.

Marco Polo Lopes, president of lobby group Aço Brasil, told the newspaper the situation could force other steelmakers to halt production if nothing is done to normalize supplies.

Aço Brasil urged immediate action to reassess security of the tailings dams in Minas Gerais to avoid more disruptions in the steel-making supply chain.

The tailings dam at Vale’s Corrego do Feijao iron ore mine in Minas Gerais burst on Jan. 25, killing 228. Another 49 people are still missing.

Vale’s production cuts, estimated at about 93 million tonnes of iron ore, could shave 0.2 percentage points from Brazil’s gross domestic product this year, the Getúlio Vargas Foundation told newspaper O Estado de S. Paulo’s Sunday edition.

Reporting by Ana Mano; Editing by Jeffrey Benkoe