World's No. 2 Pellet Producer to Halt Output After Dam Rupture

  • Samarco's Ubu unit shipments to stop once stockpiles run out
  • Activities at its Germano unit had already been suspended

Samarco Mineracao SA, the world’s second-largest producer of iron-ore pellets, will halt output of the raw material for blast furnaces following what Brazilian prosecutors described as the worst-ever environmental disaster in the state of Minas Gerais.

The joint venture between BHP Billiton Ltd. and Vale SA will suspend production and shipments of pellets at its Ubu unit in Espirito Santo state when existing stockpiles run out, Samarco said in a statement late Saturday. Activities at its Germano unit in Minas Gerais, where the accident took place, are already suspended.

As authorities continue the search for victims of a mudslide triggered by ruptured dams at Samarco’s mine, prosecutors said Friday that they plan to request the suspension of operating licenses. While benchmark iron-ore prices extended a year-to-date decline to 32 percent after the incident, a disruption may support the current premium for pellets of about $30 a dry ton.

Melbourne-based BHP, the world’s biggest mining company, said Chief Executive Officer Andrew Mackenzie will travel to the scene of the incident this week to meet with Samarco’s response team, authorities and members of affected communities.

Samarco, which was producing at an annual rate of about 30 million metric tons in September, uses water-filled pipelines to transport ore from its mines to processing plants near its port. It provides pellets, used in steel output, to about 20 countries, with dominant markets in the U.S. and Europe, researcher AME Group says.

Vale is the biggest producer and exporter of pellets.

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