The year 2022 began impacted by climate disasters in Brazil. First in Bahia, where floods reached the south of the state during the month of December, extending until January, and, more recently, in the state of Minas Gerais. The more than 3,000 homeless people and almost 14,000 homeless in Minas give the dimension of the situation.
This Monday (10), CSN, Vale and Usiminas announced the temporary suspension of operations in Minas Gerais. All companies justified that the measure was taken after the heavy rains in the region.
The stoppage, for now, should not impact the behavior of the shares of these companies, since this period of seasonality was already priced in, point out the experts interviewed by the CNN Brasil Business. “Since the event in Brumadinho, situations like this are already on the radar of investors”, says Bruno Madruga, head of equity at Monte Bravo Investimentos.
For him, the biggest concern is a possible rupture of dams, which has not yet happened. “If we have something like 2019, the entire mining and steel industry will be affected.”
Itaú BBA analysts also explain that the first quarter is seasonally weaker in production due to the usual heavy rains.
And, in line with CSN’s position (see below), despite the greater-than-normal interruption, Rodrigo Crespi, an analyst at Guide Investimentos, believes that the suspensions should not last long and “operations may return to normal in the next few years.” days” – which would not have had such a strong impact on the papers.
At the close of this Monday, CSN’s shares rose 3.32%, to R$24.92, Vale’s shares fell 1.19%, to R$83, and Usiminas’ assets appreciated 4.77%, at BRL 15.38. “The shares operated as expected”, says Madruga.
“However, it is not just the rains that can impact the sector”, says Alexsandro Nishimura, economist, head of content and partner at BRA. For him, the climate scenario adds to a scenario full of uncertainties, which combine a worrying domestic fiscal situation, a new wave of contamination by covid-19, in addition to the movement of future interest rates here and in the US – and these points should also stay on investors’ radar.
Iron ore
The Head of Monte Bravo also highlights that iron ore may be affected at this moment because the suspensions in operations end up reducing supply, while there is a strong growth in demand.
“The expectation is an increase in orders for the commodity from China, as the country expects to strengthen its infrastructure and civil construction in 2022 – a market that demands iron ore, and Vale, as a global producer, may lose ground as a strong supplier”, says Madruga.
Some estimates already point out that heavy rains in Minas Gerais may bring the company’s iron ore production close to the lower limit of the announced target for 2022, of 320 to 335 million tons.
According to preliminary calculations by Itaú BBA, a two-week stoppage in operations at Vale could impact 3 million tons of iron ore, which represents less than 1% of the company’s guidance.
interruptions
CSN interrupted the extraction and handling activities at the Casa de Pedra iron ore mine, in Congonhas (MG), and said it should resume them “in the coming days”.
The mining company Vale reported that it had partially paralyzed production in the Southeast and South Systems, in order to ensure the safety of its employees and communities due to the high level of rainfall that hits Minas Gerais.
According to a statement, the circulation of trains on the Vitória a Minas Railroad (EFVM) was affected on the Rio Piracicaba-João Monlevade stretch, preventing the flow of material from the Brucutu mine and the Mariana complex, “which have suspended production.” .
The section Desembargador Drummond-Nova Era is also at a standstill, but in the process of being released and has not affected the production of the Itabira Complex.
And mining Usiminas (Musa), controlled by the steel company, had its operations temporarily paralyzed due to heavy rains in the region of Itatiaiuçu (MG), according to today’s relevant fact.
“We clarify that, for the time being, Musa’s stoppage should not affect the supply of raw material to Usiminas, and that Musa’s own stocks will be used for supply,” said the company.
Additionally, the company informed that due to heavy rains in the region, level 1 of the Emergency Action Plan for Mining Dams (PAEBM) was activated on Saturday for its Central Dam, which has been deactivated since 2014.
Level 1 means an initial state of alert and does not represent a compromise in the dam’s safety factors, it does not require the removal of residents from risk areas or the sound of sirens.
According to the company, “Musa’s activities should resume when weather conditions improve and allow safe access to the mines and the proper functioning of equipment, as well as after a review of the conditions of the facilities in general.”
Among the three companies, so far, Vale is the most affected, as a third of the company’s production was interrupted. “Since the mining company depends a lot on the mining region”, explains Rodrigo Crespi, an analyst at Guide Investimentos.
Rains in the region
The rains should persist in most of the state this Monday (10). According to the National Institute of Meteorology (Inmet), the forecast is for overcast skies with showers, sometimes heavy, in the Northwest, Central Mineira, West, Metropolitan, Rio Doce and Zona da Mata regions.
The forecast is the same for the city of Belo Horizonte.
A meteorological alert from Inmet is in effect, until 11 am this Monday (10), for rain greater than 60 mm per hour or above 100 mm per day. The Institute points out the risk of flooding and overflowing rivers, and large landslides on slopes.
The alert affects the areas of Triângulo Mineiro, Central Mineira, Zona da Mata, Vale do Rio Doce, West of Minas, Campo das Vertentes, South/Southwest of Minas, Metropolitan Region of Belo Horizonte, Jequitinhonha, Vale do Mucuri, North of Minas and Northwest of Minas.
According to Climatempo, the forecast is that it will still rain about 100 mm in Belo Horizonte until January 13th.
*With information from Leonardo Lopes, from CNN
Reference: CNN Brasil
I am Sophia william, author of World Stock Market. I have a degree in journalism from the University of Missouri and I have worked as a reporter for several news websites. I have a passion for writing and informing people about the latest news and events happening in the world. I strive to be accurate and unbiased in my reporting, and I hope to provide readers with valuable information that they can use to make informed decisions.
