Posted on 19 Mar 2020
Brazil's Vale has shut operations at its Teluk Rubiah iron ore blending and export facility in Malaysia from Wednesday, following restrictions imposed across the country due to the coronavirus outbreak, contract customers told S&P Global Platts.
The operations will remain shut till March 31, and there was no fixed timeline provided with regards to when the delayed contracted cargoes would reach customers, they added.
Vale did not immediately respond to questions from Platts.
The Teluk Rubiah terminal serves as a blending facility for Brazilian Blend fines, or BRBF, which comprise Carajas fines from Vale's Northern and Southern Systems. After blending, the iron ore fines are exported from the facility for the Asian seaborne market.
The closure is seen to be supportive for both iron ore prices and alumina differentials amid a tight supply situation given the existing volumes stuck at Teluk Rubiah and fewer cargoes coming out of Brazil during the rainy season, market sources said.
There is lower BRBF volumes at the northern Chinese ports and this will further squeeze supply of Brazilian fines, an international trader said. As such, there is a lack of spare availability for substituting contracted volumes out of Teluk Rubiah, the source added.
With steel mills in southern China reliant on BRBF and as they have kept their sintering blends largely unchanged through the outbreak, a disruption of supply from Teluk Rubiah may force them to try alternative ores, another trader said.
But if the closure is not extended beyond two weeks, end-users will likely prefer lowering production rates instead of buying other Brazilian alternatives, the trader added.
Bid levels for alternative Brazilian fines were also seen to be increasing at the Chinese ports Wednesday following the news, market sources said.
Vale may opt to use its blending facilities in northern China to blend iron ore volumes that have already left Brazilian shores, market sources said. However, as there has been limited supply coming out of Brazil over the past few weeks due to the rains there, it is unlikely such a need will arise, they added.
While the northern Chinese port-blended version of BRBF is considered slightly inferior to that from Teluk Rubiah, it is possible to use surplus supply from the Dalian and Yantai ports -- which stock another variant of BRBF -- for the Japanese, South Korean and Taiwanese markets, sources said.
Shipping data seen by Platts showed that volumes exported to China from Teluk Rubiah have dropped in 2020 year on year.
In January and February, 700,000 mt and 900,000 mt were shipped to China, respectively. While in January and February 2019, 1.77 million mt and 1.23 million mt were shipped, the data showed.
The closure of the Teluk Rubiah facility is expected to further squeeze iron ore supply with mining restrictions in Peru and Chile due to the coronavirus outbreak already disrupting the supply chain.
Source:S&P Global Platts
