IBD Stock Analysis
- Vale stock is approaching an 18.57 buy point.
- Shares have a best-possible 99 Composite Rating.
- The relative strength line is approaching recent highs.
Industry Group Ranking
Cup with Handle
* Not real-time data. All data shown was captured at
1:22PM EST on
Brazilian mining giant Vale (VALE) is the IBD Stock of the Day. Vale stock is forming a base, as other mining stocks have seen rebounds too.
The gains for the company, one of the biggest miners of iron ore, come after commodity prices rebounded as the global economy began to reopen, helped by infrastructure spending in China, along with curbed supply elsewhere.
However two disasters at mines it oversaw in Brazil have damaged its reputation, and raised concerns about its safety protocols.
Vale Stock Sets Up
The stock’s relative strength line is approaching its recent high from January, when it reached levels not seen in two years. The line has dipped since but is rebounding again.
Other mining stocks also have strong ratings. Rio Tinto (RIO), Freeport-McMoRan (FCX), and BHP Billiton (BHP) all have 99 Composite Ratings. IBD’s Mining-Metal Ores industry group holds a No. 5 ranking out of 197 tracked.
But on Thursday, mining stocks fell as inflation fears triggered another broad sell-off. Freeport-McMoRan slid 6.6%. BHP Billiton fell 3.8%. Rio Tinto lost 5.7%.
Disasters Weigh On Commodities Comeback
China last year boosted infrastructure spending to prop up its economy, after locking down due to the coronavirus pandemic. That helped spur demand for steel, for which iron ore is a key ingredient.
Steel demand — for things like appliances and automobiles — in the U.S. has also picked up, keeping supply tight after the pandemic halted a big chunk of production.
For Vale, Brazil’s mining regions were hit particularly hard by the pandemic, Fitch noted in a CNBC article in August. The concerns about supply, the article said, had also raised prices. Vale in December cut its 2020 forecast for iron ore production.
Vale last month also agreed to a $7 billion settlement over the collapse of a mining dam in the town of Brumadinho, in the state Minas Gerais in Brazil. The disaster killed 270. It followed a similar breach in 2015 that also occurred in the state.
Vale said the settlement last month was intended to “repair the environmental and social collective damages” resulting from the rupture. The company said it intended to bring “safety, people and reparation to the core of our decisions.”
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