What You Should Know as Vale SA Hits a 52-Week High



The iron ore price rally

Commodity (COMT) producers, especially iron ore producers, have experienced nothing short of a miracle in 2016. Despite most market participants believing to the contrary, iron ore prices have rallied in 2016.

Donald Trump’s US presidential win added fuel to the fire of iron ore’s already steady gains, which caused the futures markets to explode. On November 25, 2016, for the first time in two years, iron ore prices touched $79.20 per ton. With this, the YTD (year-to-date) rises for the steelmaking (SLX) commodities reached 80.0%.

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Vale SA’s stock hit 52-week high

Stronger iron ore, coal, and other commodity prices and management execution have led to an impressive 188.0% rise in Vale SA’s (VALE) stock price YTD through November 28, 2016. The stock hit a new 52-week high on November 28, with a price of $9.10. The company remains committed to improving its balance sheet, reducing its capital expenditure, and maintaining its competitiveness.

Other iron ore producers have also recouped some of their losses from 2015. Cliffs Natural Resources (CLF) has outperformed with a YTD rise of 482.0% as of November 28, 2016.

Rio Tinto (RIO) and BHP Billiton (BHP) (BBL) have risen 32.0% and 36.0%, respectively.

In this series

In this series, we’ll see how Vale’s management is dealing with this volatile commodity price environment. We’ll explore what led to the stock’s impressive performance lately. We’ll also take a look at the company’s various segments and how they’re coping with this volatility.

We’ll also examine the company’s efforts to reduce its balance sheet risk. Finally, we’ll try to gauge market sentiment by looking at analyst ratings and changes. We’ll sum up the series by seeing how Vale’s valuation compares to its peers.

The price of iron ore is the single largest driver for Vale’s revenues and earnings. In the next part of this series, we’ll see what Vale’s view is on its outlook.


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