Vale announces plans to decommission 10 dams

Vale has announced plans to spend R$5bn dismantling 10 dams over the next three years following last week’s deadly tailing dam collapse which killed at least 99 people. The announcement follows national and international calls to improve safety.

Around 10% of Vale’s output (40 million tons a year) will be lost, equating to 2.5% of the global seaborne market. Vale believe this loss could be compensated through other mines, depending on the outcome of political and social pressures within Brazil.

According to the Sydney Morning Herold, shares in the three biggest Australian iron ore miners, Rio Tinto, BHP and Fortescue Metals Group surged today following the announcement. More than US$5.1 billion has been added to the market capitalisation of these Australian iron ore miners. The news has also triggered a recovery in Vale’s shares.

The decision to decommission the tailing dams and the associated loss of iron-ore volumes is likely to have a massive impact on Capesize vessels, intensifying the oversupply already caused by Chinese slowdown. Routes between Brazil and China as well as routes to ports in Europe are likely to be affected.

The following chart, using Dataliner data, shows Vale’s iron and steel exports over the last five years.

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