China doomsayers are misguided in Vale stock rout, CEO says

March 19, 2014 05:01 PM
Iron ore has lost 23% since August

Investors betting against China and the nation’s demand for iron-ore from top producer Vale SA will be proven wrong, Chief Executive Officer Murilo Ferreira said.

“The biggest enemy to our share price is a certain belief that China will be over,” Ferreira said during a presentation in Sao Paulo today. “They are once more betting against China as they did in 2004, 2005, 2006 and beyond and I think that people are going to fail again with their projections.”

Shares of Vale, which ships about half its iron ore and pellets to China, dropped to a five-year low earlier this month on concern a possible economic slowdown in the biggest buyer of the mineral will hurt sales. Iron-ore entered a bear market on March 7, losing 23 percent from a five-month high in August through today, as Australian miners including Rio Tinto Group boost supply and China tightens monetary conditions.

The world’s third-largest mining company has underperformed its main peers in the stock market for the past year as weakening demand growth in China and a multibillion-dollar tax dispute with Brazil weighed on investors’ confidence. Vale has sold aluminum, logistics, copper and energy assets since mid- November as it seeks to streamline operations to increase profits and regain investors’ trust.

Ferreira, 60, didn’t elaborate on his outlook for China in today’s presentation. Vale said Feb. 26 in its fourth-quarter earnings report that the world’s largest emerging market will expand about 7.5 percent this year, with growth probably slowing down gradually in coming years because of environmental restrictions and efforts to control local governments’ debt.

Global steel production is expected to increase about 4 percent in 2014, after expanding 5 percent last year, supporting rising iron-ore consumption, Vale said then.

‘No Mutts’

“We believe the emerging markets’ time has arrived,” the Vale executive said today. “We don’t accept being perceived as mutts anymore.”

Vale rose 0.1 percent to 26.57 reais in Sao Paulo, the highest close since March 7. Iron-ore prices for immediate delivery were unchanged today at $110.50 a ton, according to data compiled by The Steel Index Ltd.

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