Vale (VALE3) or CSN Mineração (CMIN3)? A company must stand out in 4Q22, according to Santander
THE Santander joins the queue of institutions that have already launched their bets for the earnings season for the fourth quarter of 2022 in the financial sector mining and steel industry.
In line with the projections of Bradesco BBI and XP InvestimentosSantander believes that mining companies are ready to deliver the best performance in the period, while producers of steel will present another wave of weaker numbers.
For mining companies, analysts expect the CSN Mineração (CMIN3) stood out positively, followed by OK (VOUCH3).
Among Brazilian steelmakers, Usiminas (USIM5) will have the worst performance, with Ebitda (earnings before interest, taxes, depreciation and amortization) plummeting 49% in the quarterly comparison, they estimate. Gerdau (GGBR4) is also expected to report a decline (-32% q/q).
THE CSN (CSNA3), along with CSN Mineração and Vale, is quoted as one of the sector’s positive highlights of the season.
Santander continues with Vale as the top pick. Analysts’ estimates for the production of iron ore is 80mt in the fourth quarter of last year, with the recovery in results mainly coming from stronger sales volumes and solid realized prices. The expected Ebitda for the mining company is US$ 5.1 billion.
“We continue to see upside risks to iron ore prices and recognize that uncertainties related to global economic activity may continue to weigh on commodity prices in the coming months. However, we expect that persistently weak supply and greater cost support will limit the risk of a decline from current levels,” say Rafael Barcellos and Arthur Biscuola, in a report published last week and released this Monday (30).
Analysts believe that the combination of seasonally weaker iron ore production in the first half of 2023 with gradual improvements in Chinese economic activity will unlock a momentum better for steelmaking raw material prices.
“We estimate an average of US$ 100/ton for iron ore prices in 2023, with prices showing performance above US$ 100/ton in the first half of 2023”, they complete.
Is it too early to celebrate?
In the evaluation of Inter Research, the fourth quarter of 2022 for mining and steel companies should not come out of the ordinary. For the institution, it is possible that Vale will present itself as a positive highlight of the harvest, although it draws attention to some points, such as operations of the Northern System still affected and the base metals with some stopping reflexes.
Inter adopts a cautious position in relation to Vale – in fact, to the movement of recovery of the Chinese economy, citing uncertainty regarding the pace of resumption of activity in the country.
Gabriela Joubert, chief analyst at Inter, explains that what has contributed to the rise in iron ore prices is the optimism that the market has generated about the process of reopening the second largest economy in the world and seasonal storage before the Year New Lunar.
“Every year there is this greater search for iron ore because of the holiday”, he says.
Therefore, with the China Coming back from the extended Lunar New Year break, February will be an “extremely important” month to understand or anticipate what Chinese demand will actually look like for the remainder of the year, adds Joubert.
To complete, the analyst still sees the Chinese real estate sector in a delicate situation.
“The industry is undergoing structural change. You need to understand the level of demand and supply and what the equilibrium price will be, ”he says. Inter’s recommendation is “neutral” for Vale.
Santander has an “outperform” recommendation (expected performance above the market average, equivalent to a “buy”) for Vale, CSN, CSN Mineração and Gerdau. Usiminas is “neutral” according to the bank’s classification.
I am an author and journalist with a focus on market news. I have worked for a global news website for the past two years, writing articles on a range of topics relating to the stock market. My work has been published in international publications and I have delivered talks at both academic institutions and business conferences around the world.
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