HSBC raises ADR target for Vale on iron ore price outlook

Brazilian mining company Vale SA had the target prices for its American depositary receipts raised by HSBC on expectations of higher iron ore prices in the short term.

The analyst said that HSBC raised Vale's common ADR target price to USD 41.75 from USD 40, implying a potential 22% return over current trading prices, analyst Jonathan Brandt said in a report Wednesday. Target prices for Vale's preferred ADRs were raised to USD 36 from USD 30.06.

HSBC's target price upgrade of Vale accompanies an upward revision by the bank of iron ore price expectations for the next three years. For 2011, HSBC sees global iron ore prices will stand at USD 136 a tonne, 22.1% above its previous estimate, while the estimate for 2012 has been raised 10% to $110 a ton, and for 2013 by 3.3% to USD 95 a tonne.

Mr Brandt said that "We see a balanced market in 2011, returning to surplus in 2012. We expect iron ore prices to decline as growing seaborne supply, fueled mainly by output from Brazil and Australia, combined with the lifting of the export ban from the Indian state of Karnataka, outpaces demand trends."

For the long term, the HSBC analyst foresees iron ore prices will remain at levels of USD 65 a tonne.

(Sourced from Dow Jones Newswires)