- After rising over 200% from 2020 lows, the iron mining giant Vale has crashed back to its pre-COVID levels.
- Iron ore is now at ~$90, historically associated with Vale having a ~$2.4 annual operating cash-flow per share (half of the current TTM levels).
- The collapse in iron ore may last for years as China's construction sector falters under immense debt, overdevelopment, and widespread energy shortages.
- Vale now has negative exposure to inflation, increasing production costs, but is likely to provide little support for iron prices.
- Fortunately, Vale has decent balance sheet health to weather the storm, but significant dividend declines are likely.
For further details see:
Vale: Iron Ore Collapse May Last Years