(Image: iStock/caio acquesta)
O BTG remains pessimistic about prices iron ore and, by extension, with the stock exchange shares. The bank does not have a buy recommendation for any stock in the sector.
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According to analysts Leonardo Correa, Marcelo Arazi Bruno Lima, the Vale (ELECTION 3) is trading at 4.3x EBITDA (operating income) for 2025, with dividend yields of 6-7% and considerable risks of negative earnings revisions versus consensus.
And more than that, the trio also says that the CSN Mining (CMIN3) remains the most expensive iron ore miner in the world, trading above 8x EBITDA 2025, even with the share price drop. The recommendation for the stock is neutral, with a target price of R$6.50.
In the year, the CMIN3 accumulates a drop of 16%. In this session, the stock even fell 4%, while the future prices of ore of ferro recorded their biggest daily drop in nearly two years.
For analysts, the commodity's fundamentals remain weak, with no sign on the radar indicating a trend reversal.
Steel production is notably depressed (August crude steel production fell 10%, well below expectations), and apparent steel consumption is down 4% year to date.
“The housing market continues to be a drag on global demand, with fixed asset investment in the real estate sector down 10% year-to-date and policymakers so far unable to stabilise the sector (house prices are already 5.5% lower year-on-year),” he highlights.
The real estate sector, especially in China, is one of the main factors responsible for fueling the demand for minerals.
On the other hand, analysts say supply in the maritime market remains robust, with Australia and Brazil exceeding expectations.
Last week, Vale raised its production forecast to 323 million to 330 million tons, compared with the previously estimated range of 310 million to 320 million tons. It is the first time in years that this has happened.
“Meanwhile, the steel mills already China are operating at significant losses and stocks at Chinese ports are high — an increase of ~40% year-to-date could harm the restocking process in the short term,” he says.
According to BTG's calculations, iron ore should remain in the range of US$ 95/t and US$ 85/t, respectively, but there are risks of a reduction.
“The main issue now lies in capacity cuts in an oversupplied market, raising questions about who will exit the market.”
On the other hand, the current marginal cost of production is around US$85/t (vs the spot price of US$92/t).