Mining and steel: Investors are fleeing equities; Vale (VALE3) is the last one standing?

A clearer change of position in the mining and steel sector concerns Gerdau; Vale is the main consensus call, says BofA (Image: REUTERS/David Gray)

The sustainability of the rise in oil prices iron ore remains a big unknown in the market. A commodity is traded at US$125-130 a ton in overseas markets, although uncertainty regarding demand in the China still be high.

In a report published this Friday (31), the Bank of America (BofA) points out that iron ore prices went into a rally before China’s economic recovery really materialized. And, as much as some data have been well received by the market, the recovery of the second largest economy in the world is not exactly linear.

Adding even more stress to the markets, the recent banking crisis in the United States and the purchase of Credit Suisse by UBS Corp raised new fears of a global recession.

BofA spoke to investors, who complained about the low tolerance and patience of the markets. About the industry mining It is steel industrythey raised doubts about the path that iron ore prices are taking and whether a stronger seasonality of demand and restocking in April are enough reasons to maintain the upward trajectory of the commodity – or if the resistance of Chinese authorities to prices higher levels would throw the steel raw material in the opposite direction.

Positioning yourself in the industry

According to BofA, the clearest change of position in the mining and steel sector concerns the Gerdau (GGBR4), which was the main consensus call in December for a stock with a strong “underweight” position (equivalent to “sell”) in relation to the weight of the benchmark in March.

In this case, the markets’ fears about the compression of the North American metallic spread also weighed, added to a weak pricing/demand momentum in Brazil at the beginning of 2023.

“A OK (VOUCH3) was the main long-term consensus position this time, although the position seems lower compared to December due to uncertainties regarding the sustainability of the iron ore price”, comments BofA.

About Usiminas (USIM5) It is CSN (CSNA3), positions look weak. Investors are awaiting more clarity on Usiminas’ Blast Furnace 3 maintenance stoppage, while CSN’s increased leverage, as well as plans to double in size over the next two to three years, are a point of concern.

Source: Moneytimes

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