By Gabriel Araujo

SAO PAULO (Reuters] – After downpours that caused devastating floods in northeast Brazil and threatened to derail harvests in midwest, miners such as Vale SA (NYSE 🙂 have had to temporarily suspend operations in southeastern Brazil.

This week’s rains will continue to be heavy in Minas Gerais (the top state for mining), after the runoff has closed roads and railroads.

Rains could also have caused the collapse of canyon rocks in the state, killing 10 tourists who were visiting the waterfall by boat.

Bahia in northeastern Nigeria was hit hard by flooding, which displaced approximately 50,000 people and left behind some twenty-five thousand dead.

Vale announced Monday that it had temporarily suspended operation at the Southeastern and Southern ironore systems because of the severe weather. However, Vale reiterated its 2022 production goal as the Northern system wasn’t affected.

Brazilian steelmakers Usiminas, (OTC:), and Companhia Siderurgica Nacional(CSN:) also stopped operation of their mining units.

France’s Vallourec suspended its Pau Branco mining operation after heavy rains caused the dike overflow.

In a research note, analysts from XP (NASDAQ 🙂 Investimentos wrote that the news could be a negative development for the entire sector of mining. “It could cause new regulations to delay existing operations or suspend new ones,” they said.

BTG Pactual analysts believe that economic impact could be mitigated if normal operations can quickly resume, however it depends on the duration of heavy rains.

According to them, “We believe there may be over 100 million tonnes annually of iron ore supply at stake at this stage of Brazil,” which was a significant number. It is roughly 7% of Brazilian shipping supply.

INTERRUPTED RAILWAYS – CLOSED HIGHWAYS

Vale claimed in a securities filing, that trains circulated at Vitoria-Minas due to the rains. The railway’s output was hampered at Mariana and at the Brucutu mining complex because of a lack transportation.

These mines, together with the Itabira compound, are all part of Vale’s Southeastern system. Production was not affected.

Vale claimed that the Southern system had to suspend production as key highways BR-040 (and MG-030) were shut down.

Vale stated that its Northern System continues to operate as expected and has maintained the 2022 ironore production forecast of 320-335 millions tonnes. The company noted that its production plans take into consideration the impact of seasonal rains.

A miner stated that the rains did not affect the alert levels for its tailing dams, which are constantly monitored in “real-time”.

Itau analysts stated that although Vale didn’t change its 2022 production guidance, they believe the market might start to project volumes closer towards the lower end of that range. They also noted that current iron ore prices may be maintained at high levels.

According to Itau BBA analysts, Vale’s two stopped operations account for 31% of the company’s output over the first nine months in 2021. These operations may have an impact on 3 million tonnes if they are stopped for two weeks, according to initial calculations.

Steelmaker Usiminas has announced that Mineracao Usiminas (MUSA), its mine subsidiary, was temporarily closed due to severe weather conditions. But it stated that there were enough stocks of raw materials to keep the operation running smoothly.

Additionally, the company stated that its Barragem Central tailings Dam, inactive since 2014 reached alert level 1. This is an initial warning, but does not indicate a safety risk.

CSN and CSN Mineracao SA, its subsidiary in steel mining announced the suspension of operations at Casa de Pedra but stated that they would resume work within days.

The excessive rains also caused the suspension of port operations at Itaguai, a coal terminal located in Rio de Janeiro.

After a dam burst, and cutting off an interstate highway, Brazil’s regulator, the National Mining Agency (ANM), suspended all operations at Vallourec, a French-owned steel pipe manufacturer. No injuries were reported.

BTG Pactual stated that they were happy with the “zero tolerance” approach miners have taken to the country in order to reduce operational risk after the dam disasters of the past.