Vale: Embracing The Electric Vehicle Revolution (Seeking Alpha – September 24, 2018)

Vale’s (VALE) iron ore operations have been by far the main driver of the company’s performance. Because of this, the Base Metals division tends to fly under the radar, despite Vale being the world’s largest producer of nickel.

However, Vale has big plans for its nickel and copper divisions, and the Brazilian company has identified the rise of electric vehicle and renewables as an important growth driver, especially in nickel. The main focus of this article will be the nickel developments, but we will also touch on copper. Both should help the Base Metals division contribute meaningfully to earnings from 2020.

Base Metals’ contribution is still modest, but rising

Investors can be forgiven for paying more attention to the Ferrous Minerals division, which includes iron ore and related metals. This segment is by far the main contributor to Vale’s performance. The company’s latest quarterly publication, for Q2 2018, confirms the weight of Ferrous Minerals:

There has been, however, a noticeable improvement in the Base Metals’ contribution. This segment includes nickel, copper and their by-products. Higher prices for the two metals in 1H18 resulted in a rising contribution to overall EBITDA:

Going back a few years, copper and nickel’s combined EBITDA contribution increased from $1.1bn in 2015 to $2.1bn in 2017, as prices recovered from their lows of 2015 and early 2016. Despite the temporary weakness in prices due to trade war fears, the 2018 Base Metals EBITDA should surpass 2017’s, on the back of the strong 1H.

For the rest of this article and informative graphs (excluded from this posting):