Brazilian iron ore giant Vale has been ordered by a federal court to suspend operations at its Tubarão and Praia Mole port. This has sparked fears of a severe impact on iron ore exports and coking coal imports, Kallanish has learned. The closure is linked to a longstanding environmental issue and is may cause a significant disruption to shipments over the coming days.

Vale was taken by surprise by the court order, which “… paralysed” iron ore exports and coal imports through the port, according to its official statement. The company says it has been steadily investing resolving its environmental issues and will “… take all appropriate legal measure to ensure the re-establishment of its activities at Tubarão and Praia Mole ports.” Tubarão handles primarily iron ore exports while Praia Mole handles coal imports.

Tubarão loaded 82.5 million tonnes of iron ore over the first three quarters of 2015, over a third of Vale’s total iron ore exports. Fears of the potential impact of this closure on iron ore supply had February iron ore futures in Singapore trading up $1.43/t at 11.30 am local time on Friday at $40.33/t.

The closure is linked to a long standing problem at Tubarão's pier No. 2 in which dust from the operation has spread over nearby residential areas. Considering that this is usually a problem in the summer, and that it is currently the rainy season, sources have suggested that the timing of the closure is not solely due to environmental reasons.

Vale has come under criticism for its environmental record, especially after at least 17 people died at an accident at its Samarco joint venture with BHP Billiton in October.

The impact of the port closure remains uncertain. Sources say environmental authorities will have to inspect the pier and issue recommendations. It is likely however that an inspection can be carried out within days and Vale may be allowed to continue operations while a solution is found to the problem.

Nevertheless, pier two can load up to 16,000 tonnes/hour of iron ore and accounts for around half of the iron ore loading capacity of the port. The loss of pier two could reduce shipments by around 150,000 tonnes/day.

Although the port is run by Vale, it also serves ArcelorMittal’s nearby steel plant and unloads coking coal for other Brazilian steelmakers. The closure of the port could therefore also have an impact on steel output in the country.