Vale SA (VALE3), Cia. Siderurgica Nacional SA (CSNA3) and MMX Mineracao e Metalicos SA (MMXM3) iron-ore mines in southeastern Brazil may suffer output disruptions and transportation delays for a third year because of heavy rains.
The state of Minas Gerais will receive 300 millimeters (11.8 inches) of showers in the seven days through Jan. 10, said Marco Antonio dos Santos, a meteorologist at Sao Paulo-based Somar Meteorologia. That equals the average for the entire month of January in the past 30 years, Santos said yesterday in an interview from Valinhos, Brazil.
Minas Gerais declared a state of emergency in 71 cities yesterday after a cold weather front caused storms and floods that have killed at least eight people. The state’s capital, Belo Horizonte, last month received the heaviest rainfall for December in a century, according to Somar. Downpours in the January-March rainy season reduced output at Vale, CSN and MMX mines and disrupted ports and railways in the past two years.
Rain can be “a serious problem for mining in Brazil,” Pedro Galdi, an equity strategist at brokerage SLW Corretora, said in a phone interview from Sao Paulo yesterday. “It’s hard to operate with storms and water.”
Vale declined 1.2 percent to 40.30 reais at 12:02 p.m. in Sao Paulo trading, while MMX dropped 1.6 percent to 6.87 reais and CSN fell 0.8 percent to 15.88 reais.
Vale, the world’s largest iron-ore producer, said last year that the heaviest rain in 44 years in the beginning of 2011 reduced output by 600,000 metric tons. MMX, the mining company controlled by Brazilian billionaire Eike Batista, also said iron-ore production fell between January and April because of downpours and power outages.
Steelmaker CSN’s 5.6 million tons of iron-ore output in the first quarter of 2010 missed the company’s estimates by 2 million tons after downpours disrupted railways and port shipments.