VALE - Vale: Potential Value Trap Reliant On Weakening Chinese Iron Ore Demand
2024-02-12 14:25:28 ET
Summary
- I previously issued a bear call on Vale in Jul-23, I am even more bearish now.
- Construction accounts for over 50% of Chinese steel demand, whereas new home sales have fallen by a third and new housing starts fallen by over 50% from their 2021 peak.
- I believe there is a significant risk China's property market downturn will materially negatively impact steel demand, iron ore prices and Vale's stock price beyond market expectations.
- Vale's P/E of 6 and dividend yield of 6% comes with this underlying risk, which I believe to be significant. Dividend investors should be aware of and cautious about it.
My previous article in Jul-23 was very bearish on Vale ( VALE ) as I expected lower iron ore demand from China to negatively impact iron ore prices and eventually Vale. Since then the stock price has gyrated up and down but not declined materially....
Vale: Potential Value Trap Reliant On Weakening Chinese Iron Ore Demand