With the 2.6% rise in iron ore in China today, metals companies shine on the São Paulo Stock Exchange. The highlight is the Gerdau shares (GGBR4), up 6.5%, quoted at R$ 28.35.
Gerdau is the largest Brazilian steel company. It is also one of the main suppliers of long steel (used in the manufacture of machines, shafts and tools) in the Americas and of special steels in the world.
Iron ore is the main raw material for steel. After falling for two straight days, prices rose again as concerns fueled by the Covid-19 outbreak in China’s biggest cities eased.
Steel prices also rebounded today, according to international agencies, after Chinese President Xi Jinping pledged to step up infrastructure works to boost domestic demand and spur economic growth. He called for more projects in transportation, energy and water conservation.
This, of course, is good for Gerdau, which can sell more for these works in China and more expensively. That’s why stocks go up.
And is it a good time to buy Gerdau?
Last week, Bank of America (BofA) raised Gerdau’s target price from R$48 to R$50, believing in a potential rise of 69.9% for the company’s shares, reiterating a buy recommendation.
The bank says the effects of the war between Russia and Ukraine on steel prices are likely to be felt in the second quarter.
Mirae Asset also recommends purchase, with a target price of BRL 38.27.