VALUATION HIGHLIGHTS
- Bulk Materials And Other constitutes 95% of the Trefis price estimate for Vale's stock.
WHAT HAS CHANGED?
- VALE's Q4 2024 Results
Vale posted a poor set of results for Q4 2024. Revenue fell 22% year-over-year to $10.12 billion, and earnings turned negative at 0.16 per share compared to 0.56 per share in the previous year. This was mainly due to impairment charges, including $1.4 billion related to the Thompson Nickel Belt and $540 million for the Voisey’s Bay mine extension.
- Trump's tariff policies
Trump has suggested reinstating a 25% tariff on global steel imports, which would directly affect steel manufacturers in the U.S. and reduce the demand for imported steel. Since Vale primarily exports iron ore (a key raw material for steelmaking), this could weaken demand from U.S.-based steel producers, indirectly impacting Vale’s sales volume and pricing power. Vale could face some challenges from weaker U.S. steel demand and shifting global trade flows, it might also benefit if increased U.S. steel production spurs greater domestic iron ore consumption. The net impact will depend on the scale of the tariffs, trade policy adjustments by major economies, and the response of steel manufacturers globally.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of Vale's value that present opportunities for upside or downside to the current Trefis price estimate for Vale:
- Iron Ore Shipments: We expect Vale's iron ore shipments to rise to over 330 million tons by the end of our review period, up from around 268 million tons in 2024. However, the demand for iron ore could slow due to weaker-than-expected growth in global demand, especially from China. If demand does not grow as expected over the forecast period, Vale may be forced to reduce its planned iron ore shipments. If instead of the currently envisaged rates, iron ore fines, and pellet shipments grow at a lower rate and reach 300 million tons instead of the currently estimated 330 million tons by the end of our forecast period, it would represent a downside of around 10% to our price estimate.
- Average Realized Iron Ore Price : We expect iron ore prices to rise steadily over the forecast period. If the recovery is faster than anticipated and Vale's realized price for iron ore fines reaches $120 per ton by the end of our forecast period as opposed to our forecast of $95 per ton as currently factored into our estimates, this would represent an upside of around 15% to our price estimate.
For additional details, select a driver above or select a division from the interactive Trefis split for Vale at the top of the page.
BUSINESS SUMMARY
Vale is one of the world's largest mining companies. It primarily operates in Brazil and 32 other countries. It is the world leader in iron ore and iron ore pellets production and has access to the world's largest nickel reserves. Apart from iron ore and nickel, it also produces copper and other base metals. Vale also operates a large logistics network in Brazil which includes a railroad, maritime terminals, and a port.
SOURCES OF VALUE
The company's Bulk Materials and Other division is the most valuable division for the following reasons:
Ferrous minerals are the company's primary focus
Ferrous minerals, which include iron ore and iron ore pellets, is the largest source of revenue for Vale, accounting for approximately 82% of the company's revenues. We expect the segment to maintain its revenue share at over 80% going forward.
Long-term contracts
We expect the company to see solid revenue growth for ferrous minerals as the company has long-term contracts with iron and steel manufacturers worldwide, thereby safeguarding its production and mining activities.
KEY TRENDS
Rising demand for copper
The long-term demand outlook for copper looks favorable, given the adoption of renewable energy and electric vehicles, both of which are very copper-intensive. For perspective, EVs use over 2x the copper used by traditional internal combustion engine vehicles. Renewable generation such as solar and wind requires over 5x more copper for each installed MW compared to traditional nuclear and fossil fuel-based power generation. This could help drive demand for Vale's copper business.
