Vale SA (ADR) (NYSE:VALE) was firmly under the bears hammering in Brazil though it witnessed a small gain in the NYSE. As a result, the biggest iron-ore mine firm in the world witnessed its shares sinking to a ten-year low. That resulted in the overall losses of the country’s benchmark index, Ibovespa, since its weightage was approximately 6%.
Extends Fall
Shares of the company have been witnessing a fall in the three-day period. That lead Vale SA (ADR) (NYSE:VALE) to hit their lowest after June 2005. That was mainly due to the iron ore price dropping below the psychological $50 a ton mark for the first time after April. There was a concern that low-cost supplies would grow even as the demand in China was witnessing a stumble. Brazil is also included as a low-cost supplier.
The MSCI Brazil/Materials index witnessed a drop of 3.9%. That was not mainly because of Vale SA (ADR) (NYSE:VALE) but others too contributed to the downtick. For instance, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) was also the biggest dragger. That was due to the crude oil price extending a fall for the fourth-straight days. As a result, the outlook for the oil producer’s offshore investments dampened.
Sinking The Index
According to Lerosa Investimentos analyst, Vitor Suzaki, the company was sinking the benchmark index, Ibovesa. The analyst said that it was tough to predict the iron-price and where it would get stabilized. The concern is on the back of ambiguity in the demand side, especially from China.
Though the crude price was around $51 a barrel, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) indicated recently that its investments would be viable economically only if the commodity price is more than $45 a barrel. Vale SA (ADR) (NYSE:VALE) is not going to be the only firm to bear the brunt. Other might also follow suit. In any case, the company could not afford to spend as long as the pricing remains challenged.
Vale S.A. (Vale), incorporated on January 11, 1943, is a metals and mining company. The Company is also a producer of iron ore and iron ore pellets, and nickel. The Company also produces manganese ore, ferroalloys, metallurgical and thermal coal, copper, platinum group metals (PGMs), gold, silver, cobalt, potash, phosphates and other fertilizer nutrients. The Company operates through four business segments: Bulk Material, Base metals, Fertilizers and Other. The Bulk Material segment includes the production and extraction of ferrous minerals, and the extraction of coal and its logistic services (railroads, ports and terminals). The Base metals segment produces and extracts non-ferrous minerals. The Fertilizers segment produces three groups of nutrients, such as potash, phosphate and nitrogen. The Other segment includes sales and expenses of other products, services and investments in joint ventures and associate in other businesses.
Bulk Material
The Bulk Material segment includes the production and extraction of ferrous minerals, as iron ore, pellets and its logistic services (railroads, ports and terminals), manganese, ferroalloys and others, ferrous products and services, and the extraction of coal and its logistic services (railroads, ports and terminals). The Company operates four systems in Brazil for producing and distributing iron ore, which the Company refers to as the Northern, Southeastern, Southern and Midwestern systems. The Northern and the Southeastern Systems consists of mines, railroads and a maritime terminal, and a port. The Southern System consists of three mining sites and two maritime terminals. The Company operates 11 pellet plants in Brazil and two pellet plants in Oman. The Company also has a 50% stake in Samarco Mineracao S.A. (Samarco), which operates an integrated system in the Brazilian states of Minas Gerais and Espírito Santo, and the Company has 25% stakes in two pellet companies in China. The Company conducts its manganese mining operations through subsidiaries in Brazil, and it produces different types of manganese ferroalloys through a wholly owned subsidiary in Brazil.
The Company offers logistics services in Brazil and other regions of the world, with railroads, maritime terminals, distribution centers and ports. Two of its four iron ore systems include an integrated railroad network linked to port and terminal facilities. The Company also has an interest in MRS Logistica S.A. (MRS), which transports its iron ore products from the Southern System mines to its maritime terminals, and VLI S.A. (VLI), which provides integrated logistics solutions to general cargo through railroads, inland and maritime terminals in Brazil. The Company owns and charters dry bulk vessels to transport the products that it sells on a cost and freight (CFR) basis to customers.
The Company conducts its coal operations primarily in Mozambique through Vale Mocambique, S.A. (Vale Mocambique), where the Company produces metallurgical and thermal coal. It also has a coal operation in Australia through Rio Doce Australia Pty Ltd (Vale Australia), where it produces metallurgical coal in Carborough Downs. The Company also has minority interests in Chinese coal and coke producers.
Base metals
The Base metals segment includes the production and extraction of non-ferrous minerals, including nickel operations (co-products and by-products) and copper. The Company’s principal nickel mines and processing operations are conducted by its wholly owned subsidiary, Vale Canada Limited (Vale Canada), which has operations in Canada and Indonesia. The Company also has nickel operations in Onca Puma, in the Brazilian state of Para. The Company also owns and operates, or have interests in, nickel refining facilities in the United Kingdom, Japan, Taiwan, South Korea and China. The Company produces cobalt as a by-product of its nickel mining and processing operations in Canada and refines at its Port Colborne facilities, in the Province of Ontario, Canada. The Company also produces cobalt as a by-product of its nickel operations in New Caledonia. The Company produces platinum group metals (PGMs) as by-products of its nickel mining and processing operations in Canada. The PGMs are concentrated at its Port Colborne facilities and refined at its precious metals refinery in Acton, England. The Company produces gold and silver as by-products of its nickel mining and processing operations in Canada, and gold as a by-product of its copper mining in Brazil.
In Brazil, the Company produces copper concentrates at Sossego and Salobo, in Carajas, in the Brazilian state of Para. In Canada, the Company produces copper concentrates, copper anodes and copper cathodes in conjunction with its nickel mining operations at Sudbury and Voisey’s Bay. In Zambia, the Company’s joint venture produces copper concentrates at Lubambe, located in the Zambian Copperbelt.
Fertilizers
The Fertilizers segment includes the production of the three groups of nutrients, such as potash, phosphate and nitrogen. The Company produces potash in Brazil, with operations in Rosario do Catete, in the state of Sergipe. The Company’s phosphate operations are conducted by its subsidiary, Vale Fertilizantes S.A. (Vale Fertilizantes), which holds the majority of the Company’s fertilizer assets in Brazil and is the Brazilian-based producer of phosphate rock, phosphate fertilizers and nitrogen fertilizers. The Company also has operations in Bayovar, a phosphate rock mine in Peru.
Other
The Other segment consists of sales and expenses of other products, services and investments in joint ventures and associate in other businesses. The Company has around 25% stake in two iron ore pelletizing plants in China, Zhuhai YPM and Anyang. It has around 25% stakes in coal operations in China, Longyu (in the Henan province) and Yankuang (in the Shandong Province). Longyu produces metallurgical and thermal coal and other related products. Yankuang produces metallurgical coke, methanol, tar oil and benzene. The Company owns a 50% stake in California Steel Industries, Inc. (CSI), a producer of flat-rolled steel and pipe products located in California, United States. In addition, the Company has a 26.9% stake in the ThyssenKrupp Companhia Siderurgica do Atlantico (TKCSA) integrated steel slab plant in the Brazilian state of Rio de Janeiro. The Company owns minority interests in two bauxite mining businesses that are both located in Brazil: Mineracao Rio do Norte S.A. (MRN) and Mineracao Paragominas S.A. (Paragominas). It also has an onshore and offshore hydrocarbon exploration portfolio in Brazil and Peru.
The Company competes with BHP Billiton plc, Rio Tinto Ltd., Fortescue Metals Group Ltd, Kumba Iron Ore Limited, Luossavaara Kiirunavaara AB, Societe Nationale Industrielle et Miniere, Anglo Ferrous Brazil, Ferrous Resources, Bahia Mineracao, Gerdau S.A., Companhia Siderurgica Nacional, V&M do Brasil S.A., Usiminas, Arcelor Mittal and Bahrain Steel.
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