Six questions about Vale.

From Infomoney - Vale's (VALE3;VALE5) shares have given back some of the gains recorded last week, but have accumulated gains of over 20% this month, with 27% for ON shares and 24% for the PNA share class.

But is this increase justified? Has the scenario changed for the company? To answer these and other questions, Citi highlighted the business environment for the mining company in a report and maintained its skepticism about the outlook. Therefore, investors should still pay close attention to Vale, which has a sell recommendation from the firm's analysts.

On the other hand, analysts Alexander Hacking and Thiago Ojea point out that there's a million-dollar question to be asked: will the stimulus measures in China generate a cyclical inflection point in steel demand? We'll have to wait and see.

Check out these six questions and answers about Vale:

1 - Why did iron ore rise 20%? According to Citi, iron ore went from US$48 to US$58 per ton, highlighting physical shortages driven by stockpiling and a seasonal improvement in steel production, but low availability of the input in China. Government stimulus, such as cuts in reserve requirements, and BHP Billiton's decision to postpone investments to expand production helped push prices up.

2 - Why did Vale's stock rise 35% last week? Citi analysts point out that the 35% increase in ADRs (American Depositary Receipts) from US$5,87 to US$7,92 may have been a short-term rally driven by the movement of iron ore (and the miner's production report didn't help). Many funds also had short positions in the stock.

3 - What is the relevance of BHP's move to postpone expansion plans? BHP Billiton announced the postponement of its expansion investment from 270 to 290 dry metric tons. The 20 metric ton drop would be relatively insignificant. "However, it is symbolically important that one of the world's largest low-cost miners is refusing to spend on additional capacity – and it is an indication that long-term prices should be above current levels, in our view. We also note that BHP previously cancelled its Outer Harbor project, which remains the only significant project cancellation among the three largest."

4 - Has anything really changed in the outlook for iron ore? The supply side of iron ore remains challenging, and an increase in production is expected, with an estimated additional supply of between 100 tonnes and 300 tonnes per year over the next four years. "In recent weeks, we have seen some important shutdowns, such as Atlas and Sinosteel in Australia. However, we have also seen developments that may lead to further production being maintained, such as Shandong of China acquiring Tonkolili and Fortescue extending its debt," he reports.

However, the weak performance of iron ore also reflects weak demand from the Chinese steel industry. However, it is possible that stimulus from the Chinese government will generate a cyclical inflection point (even while the long-term structural trend remains challenging). This is the million-dollar question for iron ore in the next 6-12 months.

5 - Have we finally lost our pessimism about Vale? There are signs of exaggerated pessimism. But the truth is also that seasonal factors could put iron ore under strong pressure in the second half of 2015. The extra supply of one hundred tons throughout the year should peak in the fourth quarter. And Chinese steel production peaks between May and August. Thus, iron ore prices could easily reach US$40 per ton.

6 - What did Vale price last week? Vale priced iron ore at US$65 per ton, which would generate an EBITDA (earnings before interest, taxes, depreciation, and amortization) of US$20. This represents an EBITDA of US$8 billion per 400 tons. Taking into account the base metals, coal, and fertilizer segments, the expected EBITDA is US$12 billion.