Iron ore futures surged more than 5 per cent to hit the highest level since 2014 on concerns that the increasingly severe crisis at top producer Vale SA will curtail global supplies, tightening the seaborne market and offsetting the impact of a slowdown in China, the largest importer.

Vale invoked forcemajeure earlier this week after a judge forced it to suspend some operations at its Brucutu mine in Brazil — a move it said would result in an annual production loss of 30 million tonnes. That’s on top of an earlier reduction of 40 mt following a deadly dam burst. In addition, Vale’s licence to operate a dam at Brucutu was revoked by a state regulator.

Iron ore has been supercharged since late January after the Brazil dam-burst, which killed at least 150 people and rattled the mining industry.

As the crisis has intensified, banks have raised their price forecasts, with Citigroup Inc boosting its 2019 estimate 40 per cent to $88 a tonne and raising the possibility that the disruption to Vale’s operations will worsen and could last for years.

Futures advanced 5.8 per cent to $94 a tonne in Singapore, the highest since August 2014. So far this week, prices are 8.9 per cent higher after surging 14 per cent last week.

Goldman Sachs Group Inc warned that there would be “significant disruption” to Brazilian supplies in the near term, and prices are expected to be elevated and volatile as production elsewhere cannot be adjusted quickly enough to offset shortages.

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