The higher prices will generate much bigger revenues for the big three Australian iron ore producers, BHP, Rio and Fortescue, than what was anticipated before the tragedy.
Mr Lawcock said the big Australian miners were regularly asked if they would expand their iron ore business in the aftermath of the Brazil shock. “I think for me the answer is clearly no,” he said.
“Worst-case maybe Brazil is a three-year story because it’s going to take them that long to re-do all their dams. But it will be a minimum three to five years if BHP or Rio wanted to add new tonnes to this market.
“Remember they’ve got to dust off design, get approvals, and then build it. I’d be shocked if they could do it any quicker than three years, probably more closer to five years,” he said.
“You’d be reluctant to make a large capital investment decision like that knowing it’s going to be three to five years before you can respond. And that’s probably sufficient time for Vale to rectify the situation it finds itself in,” he said.
“And on top of that, who knows what the iron ore market looks like in three to five years,” he said.
The failure of the Brumadinho tailings dam at the Vale mining operation has killed about 300 people. On Tuesday Vale announced hundreds of millions of dollars of write-downs and provisions related to the dam collapse.
Citi recently lifted its target prices on the big Australian iron ore miners in the wake of the disaster. It lifted its target price for Rio to $108 a share, BHP’s almost 4 per cent to $40.50, and Fortescue’s to $6.50.