Shares in Vale SA slumped the most in two weeks on Thursday, as executives signaled lackluster trends for iron ore prices this year and investors reacted to a first-quarter profit miss with disappointment.
Preferred shares, world No. 1 iron ore producer Vale’s most widely traded class of stock, shed as much as 4 percent. The decline thwarted a recovery in the stock that had made gains this week on expectations Vale would report a near record quarterly profit.
On a results conference call, company executives said supply and demand of the main ingredient for steel look balanced, helping prices stay at $70 reais per tonne or less. In February, Vale’s head of ferrous minerals Peter Poppinga expected prices hovering around $80 a tonne this year.
While both Poppinga and outgoing Chief Executive Officer Murilo Ferreira gave a rosy outlook for productivity metrics and extraction costs, some investors have questioned Vale’s over reliance on iron ore price behavior to boost profitability and cut debt.
“With a much lower iron ore price nowadays, and a weaker outlook for the second half, in our view, and no conviction on a rebound in base metal prices, we fear first-quarter numbers could have marked a peak for this year,” said Leonardo Correa, a senior mining analyst with Banco BTG Pactual.
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