"Vale SA, the worlds biggest iron- ore miner, may win back market share from rivals BHP Billiton Ltd. and Rio Tinto Group because it can boost exports faster as demand for the steelmaking raw material surges to a record.
Vale will likely take 28 percent of the iron-ore market this year, the most since 2007, when its stock rose 88 percent, according to Leonardo Correa, an analyst at Barclays Capital. Output may rise 24 percent to 313 million tons as it expands existing mines and reopens shuttered plants, Credit Suisse said.
Rio de Janeiro-based Vale will benefit as higher steel output in China drives global iron-ore demand to a record 1 billion tons this year, Correa said in an interview. Higher sales and contract price gains of as much as 50 percent may boost the shares 11 percent, based on analysts forecasts.
Record Demand
Rising demand may help Vale, Rio and BHP -- which control more than two-thirds of the seaborne iron-ore market -- win price increases of 50 percent in annual contract negotiations, following price reductions of as much as 33 percent in 2009 during the crisis, according to forecasts from Nomura Holdings Inc. and Bank of America Merrill Lynch.
Looking to Recover
Commodity producers are benefiting as Chinas exports surged 17.7 percent in December and U.S. manufacturing expanded at the fastest pace in more than three years. The steel market will grow by 9.2 percent in 2010, on rising demand from the U.S., Japan and Europe, said the World Steel Association."
All this should continue to support stronger prices for iron ore juniors like PLV IMO even tho they don't directly benefit from higher prices at this stage (indirectly they can as they are more likely to get takeover offers or requests for a majority shareholding).
Interestingly, the 3 majors have reportedly sidelined China in annual negotiations - no doubt making China keen to get as much from other sources as possible.
PLV Price at posting:
52.0¢ Sentiment: LT Buy Disclosure: Held
