Vale continues to invest in future resources and supply. If prices are even close to $110 a ton, then Vale will make huge profits going forward. The cost per ton continues to decline as the supply increases. Analyst look at the short term and GS just pushes the needle to continue to flip stock.
analysts aren't really looking at the short term. Short term prices are good and VALE makes huge money.
Longer term supply is going to overwhelm demand and prices plunge as there is a price war. Profits go to zero or negative.
That's what they're saying. I'm long the stock too, don't think prices will fall that much as there are only 3 large companies making iron ore, I believe. Hopefully they'll cut back if prices fall below $100.
But if prices go to $80 as GS says, then VALE loses out on about $40 a ton times a couple hundred million tons...that means earnings get cut in half from here. And the dividend too.