The world’s second largest mining company Vale SA announced its fiscal 2011 fourth quarter net profit fell 20% to $4.67 billion, or earnings per share of 90 cents, affected by the decline in metal prices.
According to the Bloomberg News, in October last year, the iron ore price dropped to its lowest level since the end of 2009, and buyers put pressure on to Vale to ask for changing the current quarterly pricing model. In addition, influenced by the limit of enviroment, labour restriction and project delay, Vale failed to reach the initial investment targets last year.
The HSBC analyst Jonathan Brandt said before the release of the Vale’s earnings report, the Chinese Steel Plants proposed changing the pricing system, leading the decline in the current quater iron ore prices.
He predicted the price of iron ore would decrease from the 2011 peak of $180 / ton to stabilize around $140 / ton, which means lower profits.
The Vale stock price has fallen 16% accumulatively over the past 12 months, during the same period the world’s largest mining company BHP Billiton’ shares decreased by 24%.
VALE – Vale stock price