Brazil's Vale Likely To Benefit From Rio-BHP Tie-Up - UBS
June 08 2009 - 11:17AM
Dow Jones News
Brazil miner Vale SA (VALE) is likely to benefit from Rio Tinto
PLC's (RTP) joint venture with BHP Billiton Ltd.(BHP), UBS Pactual
said in a report released Monday.
Last week Rio Tinto walked away from a deal with Aluminum Corp.
of China Ltd. (601600.SH) and agreed to an equity issue and
iron-ore joint venture with BHP.
"We reiterate our buy, as we view Vale's iron ore business as
strategically well-positioned over the long run," UBS said.
"We see this as positive for Vale as it highlights the strategic
value of consolidated iron ore operations, and iron ore pricing
support over the long run," the UBS report said.
However, UBS also said the main risk might be the strengthening
of independent iron ore producers.
UBS said it did not expect Vale and BHP-Rio to compete against
each other for market share.
Instead, UBS said, "They should focus their efforts in taking
market share from Chinese domestic ore production, and replacing
Indian ore that is increasingly staying at home as steel production
grows."
The bank also said it believed the three major miners would
likely buy up smaller producers if they offer dedicated demand for
iron ore though long-term contracts.
UBS also said it expected Vale to continue its efforts to
increase its interest in coal and copper through mergers and
acquisitions.
-By John Kolodziejski, Dow Jones Newswires; 55-21-2586-6086;
John.Kolodziejski@dowjones.com