Vale SA (NYSE:VALE) announced a long-term deal to supply top electric car maker Tesla Inc (NASDAQ:TSLA). with Class 1 nickel. The company said it would supply the low-carbon from its operations in Canada. Investors would have been expected to cheer up the stock for a deal with an EV leader like Tesla. However, Vale closed lower by more than 1% after the news. Why?
Vale stock’s indecision after the deal with Tesla underlines one fundamental problem that has faced miners – supply. When the company reported its first-quarter results on April 27, the net profit came 19.6% lower. The net profit of $4.45 billion was still better than expected at $4.24 billion. However, investors were pulled to the lower production numbers, which the company said were offset by higher prices.
Are you looking for fast-news, hot-tips and market analysis?
Sign-up for the Invezz newsletter, today.
As Vale inked a deal with Tesla, investors remained cautious since the demand side was never a problem. Besides the industry-wide supply issues, Vale has also been grappling with poor weather at its site in Minas Gerais. To the extent that the sector-wide and company-specific problems remain, Vale stock could continue to fall.
Vale stock could fall further if $16 fails to hold
Technically, Vale is trading around the $16 support. However, the stock is bearish and temporarily broke below the support. Although there is no immediate bearish trigger, the stock weakness could heighten if the weekly candlestick closes below $16. We recommend the investors wait for the stock to settle a bit lower before buying. The next support is at around $11.74.
Summary
Vale signed a long-term deal with Tesla for a low-carbon nickel. The stock showed little reaction to the news. Supply-side issues are to blame as demand for the company’s offering remains high. Investors should wait for a chance to buy the stock lower.
Where to buy right now
To invest simply and easily, users need a low-fee broker with a track record of reliability. The following brokers are highly rated, recognised worldwide, and safe to use:
- Etoro, trusted by over 13m users worldwide. Register here >
- bitFlyer, simple, easy to use and regulated. Register here >
*Cryptoasset investing is unregulated in some EU countries and the UK. No consumer protection. Your capital is at risk.
