Vale holds up better than peers as Q3 earnings loom

Vale S.A. is navigating one of the tougher stretches in the mining complex with less damage than most of its closest neighbours. VALE3 fell 2.6% on the Bovespa over the past week, a shallower drop than the peer median of roughly 3.1%. Rio Tinto lost 6.5% in the same period, Freeport-McMoRan shed 4.9%, and Teck Resources fell 5.2%. The outlier in the group was SLS, which gained 6.1% on the week, but the broader trend among correlated miners was clearly lower.

The relative resilience is worth noting given Vale's own tape: the stock is down 10.8% over the past month to BRL 65.44, and the Q3 earnings release is scheduled for 29 October. That print will matter more than usual. The bear case, documented in last Monday's note following Scotiabank's upgrade, remains centred on iron ore. China accounts for 70% to 75% of the seaborne market, and Chinese steel demand fell 7.1% last year. Iron ore still drives the bulk of Vale's earnings, and the recent guidance trim on full-year output has given sellers fresh ammunition heading into the release.

The lending market offers no sign of short-side conviction here. Borrow availability is effectively uncapped, with the metric running at the ORTEX ceiling, and utilization has been at zero for every day tracked across the past six weeks. The short score, last calculated at 25 on 9 September, is among the lowest 3% of the universe on the ORTEX short-score rank, consistent with a stock that shorts have largely passed over on the Bovespa listing. Cost-to-borrow data for VALE3 is stale at 49 days old, but the most recent reading was just 0.55%, which is low even by the standards of the past year. Nothing in the lending picture points to aggressive short positioning on this exchange.

On valuation, Vale screens cheaply. The EV/EBITDA multiple is at 4.5x and the P/E at 6.8x, with the earnings yield implying roughly 14.8%. The EV/EBIT factor ranks in the 100th percentile of the ORTEX universe. EPS momentum scores are strong too: 91st percentile over 30 days and 77th over 90 days, suggesting estimate revisions have been running upward even as the stock has drifted lower. The dividend score ranks at the 91st percentile, consistent with the August payment of BRL 0.46 per share, though the payout is modest relative to the larger distributions seen in 2021 and 2022.

The institutional register shows no unusual movement. Capital Research added 32.7 million shares in the latest reported period, the largest change among the top holders. BlackRock added roughly 10 million. Mitsui, holding 6.7% of shares, made no change. Insider activity is not material: the most recent buys from board-linked accounts were single-digit share purchases at prices around BRL 74 to 76, well above today's level, and the 90-day net figure is zero.

The level that changes the picture most cleanly is the 29 October earnings release. The stock's history on that date suggests modest moves: the last print produced a 1-day decline of 1.9% and a 5-day decline of 1.5%, with the print before it gaining 1.6% on the day. Whether VALE3 continues to outperform its mining peers on a relative basis will depend heavily on what the company says about iron ore volumes and any revision to the full-year production outlook.