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China disappoints the market, and iron ore plummets! Vale and steelmakers' shares fall as the Singapore Stock Exchange drops, and the impact is devastating
The iron ore market is suffering a major impact after investors’ expectations regarding China declined. Last Friday, the December iron ore contract on the Singapore Exchange fell 2,16% to US$103,25 per tonne. This movement directly affected the shares of Brazilian mining and steel companies, including Vale and steel sector companies.
Investors were eagerly awaiting bolder economic measures from China. The country’s top legislature, the Standing Committee of the National People’s Congress, was expected to approve significant measures to stimulate the economy, particularly to address potential trade tensions with the United States.
However, the decisions taken did not go beyond releasing 10 trillion yuan (approximately US$1,4 trillion) to deal with off-balance sheet debts, which led to disappointment.
- Raízen, a Brazilian agricultural giant, will put a package of plants up for sale, in an operation worth around R$1 billion
- Brazilian agricultural product worth 570 times more than gold production revealed
- New law will cause Brazil to lose R$3,7 TRILLION
- Petrobras confirms one of its biggest discoveries and has already set a date to begin exploration
Vale and Brazilian steelmakers were impacted
This scenario of frustrated expectations led to a wave of sales in the shares of large mining and steel companies in Brazil. Vale (VALE3) fell 4,61%, closing at R$60,63. Likewise, CSN Mineração (CMIN3) fell 5,49%, closing the day at R$5,85, and Usiminas (USIM5) fell 6,02%, quoted at R$6,25.
The only exception was Vale's competitor, Gerdau (GGBR4), which remained stable and closed the day at R$20,46, standing out on the stock exchange.
For many analysts, this drop in shares of Vale and other Brazilian steelmakers reflects the cautious stance of investors, who fear a possible slowdown in iron ore consumption in China. With the uncertain scenario, the most traded iron ore futures contract on the Dalian Stock Exchange in China fell 1,65% and closed the day at 776 yuan (US$ 108,45) per ton. This data highlights the fragility of the iron ore market in the face of Chinese policies.
Iron ore market faces difficulties
The situation of Vale and other Brazilian steelmakers is made worse when we add the global uncertainty surrounding the possible re-election of Donald Trump in the United States. Many expected China to react with stronger policies, given the threat of new trade barriers.
Lynn Song, ING's chief economist for Greater China, said the Chinese government was expected to adopt a more dovish policy if Trump were to return to power.
However, without such robust economic support, the iron ore market is struggling. Brazilian miner Vale and other steelmakers, which rely heavily on Chinese demand, are likely to remain cautious as they await clearer international policy and the direction China intends to take.
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