Scotiabank upgraded Vale to Sector Outperform from Sector Perform and kept its price target at $16 after a share-price correction brought the stock back near its starting level for the year. Analyst Alfonso Salazar said the shares may be approaching a point where a new rally could develop.
The bank identified lower ocean freight costs to China and improved netback prices for Brazilian iron-ore producers as potential near-term catalysts. Freight costs recently exceeded $40 per ton, while Salazar expects them could move toward about $20 per ton by the end of 2027.
Vale’s operating base also includes a growing metals business. Salazar said Vale could review a potential initial public offering of the base-metals division over the longer term, a decision that could support a sustained re-rating if pursued.
The valuation contrast was central to the recommendation. Vale trades at forward enterprise-value-to-EBITDA multiples of 4. 5 times and 3. 7 times the bank’s 2027 and 2028 estimates, respectively. Southern Copper trades at 14. 7 times forward EV/EBITDA, and Salazar described its valuation as highly stretched, particularly on EV/EBITDA and price-to-free-cash-flow measures.