Vale’s price performance compared to other iron ore players



Iron ore miners’ price performance

Vale’s (VALE) share price was down ~44% in 2014. This mirrored the ~48% decline in iron ore prices. Other companies—BHP Billiton (BHP) and Rio Tinto (RIO)—are also down. However, their decline isn’t as steep as Vale’s decline.

Rio Tinto performed the best among all of the iron ore producers. It was only down 13.5% in 2014. Meanwhile, BHP was down 23.7%. However, the fall isn’t just due to the decline in iron ore prices. It’s also due to the recent slump in oil prices.

The pure plays and midcaps—like Fortescue Metals Group (FSUGY) and Cliffs Natural Resources (CLF)—are down 53.1% and 70.2%, respectively.

ETFs—like the SPDR S&P Metals and Mining ETF (XME)—are a good way to gain exposure to this sector without picking individual company stocks.

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Vale’s downfall continues

Vale’s decline in stock price continues into 2015 as well. Citigroup reduced its target for iron ore in 2015 and 2016 to $58 per ton and $62 per ton. Previously, the target was $65 per ton. This impacted Vale’s stock price. Its stock price was down ~6% after the report was released.

As we’ll discuss later in this series, iron ore prices have been revised down due to the impact of oil and foreign exchange. These factors will help Vale reduce its costs as well.

Series overview

In this series, we’ll talk discuss Vale’s price decline. We’ll see how its cost position changed—compared to other companies. We’ll discuss how its cost position changed due to the recent oil price decline and the Brazilian real depreciation versus the Australian dollar. We’ll do a cost analysis of major seaborne iron ore players.

We’ll also discuss Vale’s recent developments—like the potential bid on its nickel assets and the sale of its Fosbrasil assets in Brazil. In the next part of this series, we’ll look at Vale’s business and its segments.


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