Vale (NYSE:VALE) trades little changed on Thursday as Scotiabank upgraded the world’s largest miner of iron ore and nickel to Sector Outperform from Sector Perform with a $14 price target, raised from $12.50, saying the company is seeking ways to expand its global presence and improve its product portfolio through blending, despite expectations of continued steel and iron ore demand contraction in China.
While Vale (NYSE:VALE) management said it will seek to maintain iron ore shipments to China stable while expanding shipments to other countries, Scotiabank’s Alfonso Salazar believes such a strategy may prove increasingly challenging considering his expectation of weaker steel demand in China and the need for Australian miners to maintain or even increase market share, but the analyst said the company looks well positioned to gain market share in other markets, pointing to the potential for India to become a key market and demand from Europe to potentially surprise to the upside if the much needed re-industrialization materializes.
Vale (VALE) believes blending will continue to offer a competitive advantage, Salazar said; relative to peers, the difference in silica content between Vale’s Carajas fines and other fines produced in the Southern and Southeastern systems offer an ample spectrum for optimal blending choices, which the company’s peers may find it harder to reach optimal ratios even by using Simandou’s ores, which have low alumina and silica contents.