JP Morgan says Vale a buy, iron ore price weakness only temporary

|By:, SA News Editor

Fears of a China slowdown have sent iron ore prices tumbling, and BHP Billiton (BHP) and Rio Tinto (RIO) are warning of lower prices through this year, but J.P. Morgan analysts maintain a Buy rating on Brazilian iron ore producer Vale (VALE -1.5%).

The firm thinks iron ore prices and could test Sept. 2012 lows of ~$87/ton, but prices below $110-$120 should be temporary as weaker prices should make high cost producers uneconomical and, together with a potential resumption in restocking at lower levels, should act as a buoyant force on prices.

Also, JPM says Vale shares already have priced in a very pessimistic scenario, and valuations are attractive even with iron ore prices at $100/ton.