Vale SA (ADR) (NYSE:VALE) recently revealed its figures for iron ore production, during the 4Q2015. The company reported a figure of 85.4 million tons, during the quarter, compared to 88.2 million tons in 3Q2015. Even thought the figures were higher than the preceding year, 83 million, but were below estimates of 88.3 million tons. These figures did not include the iron production from Samarco projects.
Currently, the market for iron ore and related commodities is facing a slowdown, mainly due to oversupply. However, that has not stopped Vale from continuing to increase its iron ore production. Analysts expect the oversupply to last for a few years to come, with improving market conditions in 2016. Steelmakers in China have already started to increase their demands for iron ore and prices have climbed to their highest in the past 3-months. Miners on the other hand, have been much slower in their production growth. However, the sustaining of this trend is highly dependent on the demand for steel in the international market.
Vale had recently started to climb, following the news of a possible settlement being reached about the Samarco incident. Unfortunately, after missing its production estimates, investors are divided on their view of the stock. While slowing down production might be favorable in the current market conditions, but there is a slight possibility of the conditions improving.
Analysts are, however, betting against miners, for the current year. TheStreet has awarded Vale a sell rating, based on a low return on equity. The company also suffers from low operating cash flow and a very meager growth in its EPS. Liberum Capital has already alerted the investors that this is an opportunity to bet against the miners. Even after the recent rise in ore prices, iron is trading at only 25% of its peak value.
Vale SA (ADR) (NYSE:VALE) had a trade volume of 42.93 million and reported a rise of 1.56% in its share value, during the February 19 trading session, to close at $2.92.