June 14, 2024

Vale’s ADR (VALE3) rating downgraded for sale by UBS as crude oil downgrades

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Vale's ADR (VALE3) rating downgraded for sale by UBS as crude oil downgrades


middle Iron ore price reduction sequence, UBS promoted “double discount for sale” of Vale’s New York stock (VALE3).

According to the bank’s report, the target rate for ADR was lowered from $22 to $15. Yesterday the ADR rate closed at $16.72.

Behind the analysis forecast an iron ore surplus of about 150 million tons to grow rapidly in 2022.

This is due to the restrictions on steel production in China that affect the demand for iron ore, due to the continuous increase in the global supply of commodity, as well as the growth of raw material extraction in China.

Consequently, UBS cut its iron ore price forecasts by 10% (2021), 12% (2022) and 6% (2023) respectively to $163, $89 and $80 per ton.

For UBS, Chinese steel production is expected to stabilize at around 1.07 billion, while iron ore supply is expected to continue increasing.

Another negative pressure factor pointed out was the rising costs of transporting iron ore, in light of the logistical cost inflation caused by the pandemic and rising fuel prices.

Ok: profits

With this, UBS assesses that Vale’s profit-driven hypothesis becomes “much less attractive”, with a crude price of less than $100.

The day before, it was Vale announced its agreement to distribute R$40.2 billion in dividends to its shareholders – Which is equivalent to 8,108316476 Brazilian riyals per share.

According to the company, the proceeds will be received by investors who have Vale shares in their portfolio when trading closes on September 22 and all foreigners with ADRs on September 24.

Thus, September 23 will be the “previous date” of the distribution i.e. whoever buys Vale shares from that day onwards will not be entitled to the dividend. Payment will be made on September 30th.

falling stocks

Even with the dividend announcement, which came in higher than analysts’ expectations, Vale’s shares fell in the trading session on Friday (17).

At around 11:15 a.m., shares of the B3 miner were down about 2.9%, quoted at R$85.35, while Ibovespa was down more than 1%, near 112,000 points.

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