Bank of America has said in a report that Vale SA will not be saving "excess cash flows" to finance purchases, but will rather be returning the surplus to its shareholders, implying that the company will not be pursuing any large acquisitions in the short term, according to analysts at Bank of America in San Paulo. The company has already spent $28.3 billion in acquisitions since May 2000, and Vale's stock has grown 25 percent in the past year. The analysts have said however, that because of Vale's focus on so-called organic growth, alongside the higher levels of iron ore prices, it may produce a steady re-rating of the company's shares. Last week Vale approved a stock buyback of $2 billion and proposed an extraordinary dividend and the company also plans to boost its regular dividends by another $500 million, on top of the $2.5 billion dollar dividend the corporation announced earlier this year.
Bank of America has also reported that as Brazilian stocks fall, steel prices will likely follow suit. Bovespa sank after four weeks of gains, and at least two stocks fell for every one that rose. Petroleo Brasileiro SA, the state-controlled oil company in Brazil also declined. Bank of America cited a weak price outlook of Brazil's biggest steel-maker, Gerdau SA, and cut its rating on the stock as well. The Bank of America analysts have also noted that as rising imports increase competition, steel prices will consequently probably fall in the fourth quarter. As a result of higher raw material costs, Gerdau's earnings in the second half are expected to disappoint.