VALE S.A. Earnings to Soar
VALE S.A. (NYSE: VALE) is the top iron ore mining company in the world, and the deals they just made with Posco of Korea and Nippon Steel and Sumitomo Metal Industries of Japan, position for solid earnings in the quarter, and probably for all of 2010.
The recent agreement, which will price iron ore on a quarterly basis, increases the iron ore price by 90 percent, while the cost of doing business will be close to the usual, making it a good deal for the earnings of Vale and other iron ore producers.
Per the new contract, prices will be between $100-110 a metric ton, whereas the current price stands close to $62 a metric ton.
It is expected that China will follow in the footsteps of their counterparts, although they feel that they should get a better price because they buy more iron ore.
Even if they do get a better price, it shouldn't be far off from the deal made with the Koreans and Japanese.
Many analysts expect Vale to end the year with a share price of $40 as a result of the changing market price mechanism.
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