A seven-day selloff in iron ore sent Vale SA, the world’s largest producer of the commodity, to its worst week since January. The Ibovespa joined a slide in emerging-market stocks.
Shares of Vale extended their weekly tumble to 8.8 percent as shipments of the steelmaking ingredient surged and data showed the slowdown in China’s steel industry deepened. The miner, whose top export market is the Asian nation, accounts for about 6 percent of Ibovespa’s weighting.
“It’s very hard for a producer to have good results when the price of its main product is sinking,” Lauro Vilares, an analyst at brokerage Guide Investimentos, said from Sao Paulo. “Vale is in a very bad situation not only because iron ore is falling, but also on expectations prices will be low for quite some time.”
The decline in iron ore eroded returns notched in the second quarter, when prices rebounded from a decade-low as shipments missed expectations. Both Goldman Sachs Group Inc. and Citigroup Inc. had said the gains in April and May wouldn’t last, with low-cost production set to increase while demand growth slowed in China.
Brazil’s benchmark equity index fell 1.1 percent to 52,519.41 at the close of trading in Sao Paulo, bringing a weekly decline to 2.8 percent. Trading volume was 3.12 billion reais ($994 million), about half this year’s daily average, data compiled by Bloomberg show. The Ibovespa followed a slump in shares of developing nations as Greece called for a writedown on its debt and investors braced for a referendum this weekend.
While less than 0.1 percent of Brazil’s exports went to Greece last year, some of its biggest markets are those most vulnerable to a fallout from the Greek crisis. Nineteen percent of the goods sent abroad went to the European Union, and 56 percent went to emerging markets.
Paper maker Klabin SA led commodity exporters higher as the Brazilian real weakened. Pulp producer Fibria Celulose SA, which gets about 90 percent of its revenue from exports, has gained 32 percent this year following an advance in the price of the material.