On the heels of news in late May that Brazilian mining giant Vale planned to fund a $16 million expansion for its iron ore mines come reports of multiple mine closures and job losses along the country's iron ore front lines. Although these two circumstances may sound like contradictions on the surface, there's actually a direct connection.
Carajás Iron Mine from space.
Due to competition with Australian mines for Chinese business, major players within the Brazilian mining industry--such as Vale--have stepped up their iron ore production. The losers in this power dynamic, however, have not been limited to Australian companies. The losers have also been smaller Brazilian-based mines. Due to their higher production costs, they've been unable to keep up with increased demands.
Iron ore tends to be a scale game, with larger producers able to afford better infrastructure like rail or slurry pipes which in turn reduce costs. With less efficient infrastructure, smaller mines usually have higher costs and struggle in a price slump. (Hellenic Shipping News Worldwide)So although Vale's iron ore expansion has benefited the company itself, and by extension Brazil's GDP; and although Vale's success expands Brazil's iron ore industry, this expansion comes at a cost.
Rampant unemployment is just one ramification facing mining communities. Local shop owners report having seen a one-third drop in traffic since the mine closures. Likewise, with 70% of local government revenue generated (whether directly or indirectly) by mining, it's likely that public projects will require severe cuts.
It's our hope that these smaller mining companies find a way to remain viable, offer stable jobs for their employees, and provide more competition on the open market.
Remember that we provide OTR tires for all of your iron ore mining needs. Feel free to contact us for the best deals.
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