It is still too early to buy Vale shares despite the stock's outperformance of the falling price of iron ore in recent weeks, Andreas Bokkenheuser, analyst at UBS, said on Tuesday.
Vale's share price suggests that iron ore should be at $104 per tonne, according to UBS estimates. That level is not low enough to present a buying opportunity, Bokkenheuser wrote in a note to clients.
The price of iron ore fell below $90 per tonne for the first time in almost two years this week due to growing supply from major mining companies including Rio Tinto and BHP Billiton.
Vale's New York-traded common shares would become more attractive were they to reflect an iron ore price of $80-100 per tonne, which UBS estimates would be a level of around $10-11 per share.
The New York shares fell 1 percent to $12.60 in mid-day trading.
Editing by Andrew Hay