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Fatal Landslide in Brazil Pushes Iron Ore Toward Record

SYDNEY—Iron-ore prices are surging toward a record as a landslide at a Brazilian iron-ore mine intensifies concerns about supply and Chinese demand runs hot.

The price of iron ore soared 7.8% to $176.90 a metric ton Monday, its highest since September 2011 and almost double its value at the start of the year, according to data from S&P Global Platts.

Iron ore, the main ingredient in steel, is one of the world’s most-traded commodities and is among the best performing assets of 2020. It is now less than 10% from a record price of $193 a ton reached in February 2011.

The landslide last week at

Vale SA’s


VALE -2.13%

Córrego do Feijão mine, which killed one worker, has raised fresh concerns about supplies from Brazil. Shipments from that country—the second biggest exporter of iron ore, after Australia—have yet to fully recover from earlier waste-dam collapses and pandemic-related disruptions to port and rail facilities.

The city of Brumadinho, in Brazil’s Minas Gerais state, where the Córrego do Feijão mine is located, has suspended Vale’s operating license for seven days, Vale said. It is the same part of Brazil where a dam burst in 2019, killing 270 people.

“As it is close to where the original dam failure occurred, the market is becoming increasingly concerned that Vale will struggle to hit its new, lower target for output,” said

Daniel Hynes,

senior commodity strategist at

Australia and New Zealand Banking Group Ltd.

The market was caught out this month when Vale said it would fail to meet an earlier production target for 2020 and set a 2021 goal well below analysts’ expectations, Mr. Hynes said. Vale produces about 20% of the world’s iron ore traded by sea.

There are also concerns about supplies from Australia as the country heads into its annual cyclone season, while China—the top buyer of iron ore globally—has taken aim at commodities from coal to wine with tariffs and other restrictions on imports as part of a broader diplomatic dispute.

“There is no wonder the market is placing a supply risk premium to prices at the moment,” Mr. Hynes said.

Stimulus in China and a relatively low price for metallurgical coal, also used to make steel, have given mills the flexibility to pay more for iron ore, Australia’s government said in a report Monday.

China produces more than half of the world’s steel, and has been churning it out at near-record rates recently. Its crude steel output totaled 92.2 million tons in October, up 13% on the same month a year earlier, according to the World Steel Association. November data are due to be published later Tuesday.

A number of analysts boosted their forecasts for iron ore in recent weeks as prices rose.

J.P. Morgan

lifted its 2021 price forecast by 20% to $126 a ton, citing strong Chinese steel output and the softer-than-expected production forecasts from Vale.

“China data keeps getting better,” J.P. Morgan analyst

Lyndon Fagan

wrote in a Dec. 14 note. Gauges of China’s manufacturing and nonmanufacturing activity recently posted their highest levels in three and eight years, respectively, signaling a broadening recovery in the world’s second-largest economy.

Speculators have also been stoking the rally, analysts say.

Jefferies Financial Group Inc.

on Dec. 10 forecast the iron-ore price would peak between $180 and $200 a ton in the first quarter of 2021.

Still, the price for the steelmaking commodity should retreat in the year ahead as Chinese demand cools and supplies recover, said Capital Economics analyst Samuel Burman. He forecasts the price to return to $100 a ton by the end of next year.

Citigroup Inc.

has the same forecast for end-of-2021 prices, although the bank expects iron ore to remain well above that over the next few months on a shortfall in supply. “Expected surpluses beyond 2022 should leave prices on a downward trend from cyclical highs,” Citi said in a note.

Write to Rhiannon Hoyle at [email protected]

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