Itaú BBA confirmed its favourable view on Vale (VALE3) after the release of the miner’s second-quarter 2025 results. The bank maintained its ‘outperform’ recommendation, which is equivalent to a ‘buy’ rating, and set its target price for R$70 per share by the end of 2026.
According to a local media outlet, InfoMoney, that price represents a 31% potential increase from current levels, indicating trust in the company’s long-term fundamentals despite short-term operational changes.
Iron ore market forecast: balanced supply and strong demand
The bank predicts that the global iron ore market will remain largely balanced in the next quarter. Demand from China and Southeast Asia remains a stable foundation for pricing.
At the same time, supply dynamics are affected by both the start of new projects and the natural decline of existing mines.
One of the most significant supply-side developments is the anticipated commencement of production at Simandou, a huge iron ore complex in West Africa.
Itaú BBA predicts that while Simandou will raise market volumes, this will be somewhat offset by greater depletion rates among established producers, reducing the risk of oversupply.
Price forecasts increased for 2025 and 2026
Itaú BBA raised its iron ore pricing forecast due to strong demand and limited supply. The bank predicts that iron ore prices will be between $95 and $100 a ton in the second half of 2025.
This modification increased the full-year average prediction to $99 per ton, up from $95.
Looking ahead to 2026, the bank now anticipates an average price of $95 per ton, up from $90 earlier.
The revised assumptions align with Itaú BBA’s opinion that the commodities cycle remains positive, notwithstanding new supply entering the market.
EBITDA forecasts adjusted despite higher prices
Itaú BBA reduced Vale’s earnings outlook, despite an upward revision in pricing forecasts. For 2025, expected EBITDA has been decreased to $14.1 billion, 3% lower than the previous estimate.
The adjustment reflects deteriorating pellet market dynamics, which forced Vale to reduce production due to lower market premiums.
EBITDA is predicted to reach $15.5 billion in 2026, showing a 10% rise over 2025 but still 2% below the previous prediction.
Although higher iron ore prices are expected to boost revenue, Itaú BBA is wary about quality premiums and overall shipment quantities, which could impact earnings.
Debt levels and capital returns
According to Itaú BBA, Vale’s net debt is expected to reach $16 billion by 2025, slightly exceeding the company’s projected range of $10 billion to $20 billion.
This level of debt gives Vale financial flexibility while preserving balance sheet discipline.
If iron ore prices remain around $100 per ton, the bank expects strong cash creation, providing the company plenty of room for shareholder dividends.
Itaú BBA anticipates management to prioritise share repurchases due to the stock’s present price; however, dividends and buybacks are still options.
Attractive value and cash flow potential
Vale’s valuation remains a key component of Itaú BBA’s positive outlook. The stock trades at 3.8 times enterprise value to EBITDA for 2026, which the bank considers attractive when compared to peers and historical trends.
Itaú BBA forecasts an average free cash flow yield of 8% for 2026-2028, demonstrating the company’s potential to provide significant value to shareholders in the longer term.
Vale’s investment case is based on a combination of reliable demand, efficient capital deployment, and advantageous pricing.
Overall, Itaú BBA’s modified model indicates a cautiously positive prognosis for Vale. While the company confronts challenges from lower pellet premiums and lower shipment volumes, higher iron ore prices and robust demand fundamentals provide a positive backdrop.
With a confirmed target price of R$70 per share and an excellent value profile, Vale remains a prominent player in the global iron ore market.
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