The Rising Influence of Rising Affluence

[Democritus_of_Abdera]

Re: Vale as competitor for CLF in US...

As stated by Dew in #msg-107541385, CLF's current supply to the US market in the Upper Midwest is not likely to be replaced by supply from Vale, largely because of shipping costs and constraints. Competition from the Iron Ore Company of Canada (IOC) is another issue, however.

It should be noted, as pointed out by jbog (e.g. #msg-87769743), Vale has the pellet capacity and is close enough to compete head-to-head with CLF on supply contracts for any new US steel plants that might come online outside the great lakes region.

If Goncalves succeeds in divesting or mothballing the non-US properties, then I believe investors will start wondering what growth opportunities are available to CLF. If that mind-set develops, an understanding of the competitive landscape in the US will be important in predicting the relative P/E ratio that CLF stock will settle at.

A Bloomberg article addressed Vale's entry into the US market on Dec 18, 2013 ( http://www.bloomberg.com/news/2013-12-18/vale-seeks-two-u-s-pellets-supply-contracts-as-shale-gas-booms.html ):

Vale SA (VALE), the world’s largest iron-ore exporter, expects next year to sign pellet supply contracts in the U.S. as a shale gas boom provides an opportunity to tap a market that represents less than 1 percent of shipments.

The company, based in Rio de Janeiro, is in talks with investors of two U.S. steel plant projects including Voestalpine AG to supply the processed form of iron-ore, Vale Chief Executive Officer Murilo Ferreira said today. Samarco Mineracao SA, a pellet producer that Vale controls with BHP Billiton Ltd., earlier this year signed a supply accord with Nucor Corp. (NUE), the largest U.S. steelmaker by market value, he said.

Vale, which last year shut three pellet feed plants in Brazil because of lower demand from steelmakers, could eventually consider restarting the facilities to supply the U.S. market, Ferreira said.