26 Mar

Why Vale’s Problems Will Likely Continue

WRITTEN BY Anuradha Garg

Vale’s dam burst

Vale’s (VALE) problems don’t seem to be ending anytime soon. On January 25, a dam ruptured at Vale’s iron ore mine in Brazil’s (EWZ) Minas Gerais state. Due to the collapse, close to 300 people have either been killed or are still missing. Read Will Vale’s Second Dam Burst Overshadow Positive Catalysts? to learn more. In November 2015, a dam jointly owned by Vale and BHP Billiton (BHP) burst and killed 19 people.

Why Vale’s Problems Will Likely Continue

Vale’s compounding problems

Since the disaster on January 25, Vale stock has fallen 13.5% as of March 25. During the same period, the S&P 500 (SPY) and the Dow Jones Industrial Average Index (DIA) have risen 5.9% and 3.9%, respectively. There have been several legal orders on Vale since the disaster. The legal orders are meant to curtail the company’s production or to cease the operations as some of its mines. Vale was hit by a local court injunction on March 25 to halt the operations at 13 of its tailings dams in Brazil. On February 27, credit rating agency Moody’s downgraded Vale’s credit rating to junk status with a negative outlook.

On March 2, Vale’s CEO, Fabio Schvartsman, and three other senior executives temporarily stepped down due to recommendations from the Federal Public Prosecution Office.

Vale’s funds frozen

As reported by Reuters, on March 26, Brazilian state prosecutors and public defenders won a bid to freeze Vale’s assets worth ~$765 million. Vale said, “The company has not yet been formally notified of the decision and will take appropriate action within the legal deadline.”

While the company could make up part of the lost production from other mines. The reduced production could have a significant impact on Vale’s total production going forward.

Iron ore prices are rising due to supply tightness, which is positive for Vale’s peers (XME) including BHP Billiton (BHP), Rio Tinto (RIO), and Cleveland Cliffs (CLF).

Latest articles

Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.

The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.

Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.

Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.

14 Jun

IEA Again Slashes Its Oil Demand Growth Estimate

WRITTEN BY Rabindra Samanta

As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.

14 Jun

Why Kimberly-Clark Stock May Stop Rising


Kimberly-Clark (KMB) stock has risen 20.5% this year, boosted by the company’s better-than-expected sales and earnings during its last reported quarter. However, its stock could stop climbing. Here's why.