As China bids up high-quality ore premium, J.P. Morgan says buy Vale

|About: Vale S.A. (VALE)|By:, SA News Editor

China has been bidding up premiums for high-quality iron ore: The price of Australia lump is fetching a $17-$18.6/metric ton premium with 62% iron content - six months ago the premium was $8 - while pellets with 65% iron ore content are trading at a $40-$42/metric ton premium, up $10 in the same period.

It's good news for big miners such as Vale (VALE +0.6%), BHP Billiton (BHP +1%) and Rio Tinto (RIO +0.9%), which are among the top suppliers of high-grade ores.

J.P. Morgan says the higher premiums for pellets, lumps and for higher quality ore and the reduced risk of higher freight rates bodes well "for a company like Vale, which has high quality ore and pellets, we may see higher than expected realized prices driving earnings surprises."