By James Attwood
Feb. 25 (Bloomberg) -- Cia. Vale do Rio Doce, the world’s biggest iron-ore producer, dropped in U.S. trading while Brazil’s markets were closed for Carnival, pointing to declines when the two-day holiday ends.
Vale’s American depositary receipts led a retreat among Brazilian metals producers as analysts said profit estimates are too high after the company’s fourth-quarter earnings plunged 47 percent. Petroleo Brasileiro SA, the state-controlled oil producer, rose on crude’s rebound from a two-day slump.
Brazil’s benchmark stock index has lost 9.5 percent since climbing to a four-month high Feb. 6, paring its 2009 gain to 3.1 percent. Rio de Janeiro-based Vale fell 14 percent in the same period after rising as much as 36 percent this year on speculation that demand from China, the biggest consumer of iron ore, may improve as the country restocks inventories.
“At the beginning of the year you had a bit of restocking optimism, which has perhaps now run its course,” Bill Rudman, who helps manage $1.5 billion at Blackfriars Asset Management in London, said a telephone interview yesterday.
Vale closed Feb. 20 at 27.8 reais. That price represents a 3.6 percent premium to the ADRs as of yesterday. The New York- traded shares declined 4.9 percent in the past two days.
Gerdau, CSN
Gerdau SA, Latin America’s biggest steelmaker, closed Feb. 20 at 13.48 reais in Sao Paulo trading, or a 7.8 percent premium to the ADRs, which slid 7.3 percent the past two days to $5.24. Cia. Siderurgica Nacional SA, Brazil’s third-largest steel producer, closed at 33.66 reais, or 4.4 percent more than its U.S.-traded shares. They lost 4.7 percent in the past two days.
Vale ADRs today retreated 0.9 percent to $12.82 as of 9:41 a.m. New York time. Gerdau dropped 2.5 percent, while CSN ADRs slipped 0.7 percent.
Vale’s U.S.-traded shares fell the most in 12 weeks on Feb. 23 as Deutsche Bank AG said analyst earnings estimates are too high and Canaccord Adams lowered its rating on the stock. Gerdau had its profit and share estimates cut at Deutsche Bank after reporting a 67 percent drop in fourth-quarter profit last week.
The Baltic Dry Index, a measure of shipping costs for commodities, fell for a third straight session today after rising 10 percent last week on greater shipments of Brazilian iron ore. Steelmakers raised output too quickly in response to a rebound in Chinese demand and need to limit supply to support a “sustained recovery,” UBS AG said in a Feb. 23 note.
Weekly Slump
Brazilian stocks had their worst week in three months last week as Latin American markets joined a drop in stocks around the world on concern the global recession is deepening. Brazil’s Bovespa index slumped 7.1 percent, the biggest weekly retreat since November.
The ADRs of Vale, Gerdau and CSN fell at least 11 percent on Feb. 23 before recovering some of the declines yesterday. Vale rose 7.8 percent to $12.93 yesterday, while Gerdau climbed 5.7 percent to $5.24 and CSN rebounded 7.1 percent to $13.51.
Petrobras ADRs added 7.4 percent, erasing a 6 percent drop on Feb. 23. Crude oil rose for the first time in three days as the U.S. stock market advanced. Petrobras today gained 1.4 percent to $27.20 in New York.
The ADRs of Brazilian banks rallied along with their U.S. counterparts yesterday after Federal Reserve Chairman Ben S. Bernanke said the U.S. government’s bank-capitalization plan is designed to shore up lenders’ common equity only if the economy worsens and creates more losses for financial institutions.
Banco Itau Holding Financeira SA, which became Brazil’s largest financial company after acquiring Uniao de Bancos Brasileiros SA, rose 11 percent to $9.78, erasing a 7.4 percent drop on Feb. 23. Unibanco increased 11 percent to $56.15 yesterday.
Itau Unibanco today reported a profit of 7.8 billion reais ($3.3 billion) for 2008. Itau ADRs dropped 3.5 percent to $9.44. Unibanco declined 4.4 percent to $53.71.
To contact the reporter on this story: James Attwood in Santiago at jattwood3@bloomberg.net
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