A bid by China to clean up pollution in its biggest cities and industrial towns is fueling a push to mine resource riches on the other side of the globe in the Amazon rainforest — one of the most environmentally sensitive areas on Earth.
Smog-laden skies across the world’s most-populated country prompted the government to impose curbs on a domestic steel industry that uses coal-fired blast furnaces to melt iron ore. That’s led to increased demand for higher-grade ore from overseas that can produce more steel with fewer emissions, and profit margins on those shipments have surged.
Exports by Brazil, one of the biggest suppliers, are headed for a fourth straight record in 2017. Top producer Vale SA is shifting production from low-grade reserves in the southeast that have been mined for a century to develop more high-grade deposits in the isolated northern regions of the Amazon, where environmentalists fear further damage to the world’s largest rainforest.
“It’s a contradiction,” said Frederico Martins, an official at the Brazilian government’s Chico Mendes Institute for Biodiversity Conservation who monitored Vale’s operations in the Amazon when he was managing the Carajas national forest for a decade. “China wants to clean up 20 years of pollution over there, yet impacting things more here.”
The incentive for Brazil to produce more is growing, especially for Vale, which is seeking to reduce $22 billion of debt it ran up during a three-year price slump that ended in 2016. The gap between low-grade and high-grade ore is widening to about $50 a metric ton from less than $10 about 18 months ago.
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