--China steelmaking levels, Brazil rains to affect result

--Vale registered nonrecurrent gain a year ago on aluminum asset sales

--Vale, analysts see brighter days ahead

By Diana Kinch

Of Dow Jones NEWSWIRES

RIO DE JANEIRO -(Dow Jones)- Brazilian mining company Vale SA (VALE, VALE5.BR), the world's biggest producer and exporter of iron ore, is set to announce a fall in net profit and revenues for the third consecutive quarter on Wednesday due to unusually heavy rains and slow demand early in the year in China, its biggest customer for the steelmaking ingredient.

Vale may report first-quarter net profit of $3.563 billion, according to the average of 10 analysts surveyed by Dow Jones Newswires. This would be more than 40% below the $6.826 billion recorded in the year-earlier period, when demand surged as manufacturing industries globally enjoyed a recovery after the 2009 financial crisis. That had allowed Vale to reach a record result for a first quarter, when the company's production is typically reduced by climatic factors.

First-quarter net revenue may slip to $12.377 billion, from $13.548 billion a year earlier, according to the analysts' average estimate. Vale declared force majeure on some iron ore shipments from its south and southeast Brazil systems for 13 days due to unseasonably heavy rainfall, slashing Brazil's iron ore exports for the month. These systems account for about 60% of the company's entire iron-ore output.

Global demand for iron ore and steel dipped early in 2012 as China's property market slowed after the Asian nation introduced credit control measures in second-half 2011. Concerns over European sovereign debt issues also damped metals markets. However, demand recovered strongly in March, lifting Chinese crude steel production levels to record highs in the month, according to local data.

Spot prices for standard iron ore fines with 62% iron content also rose from a quarterly low of $134 per metric ton on Feb. 17 to a monthly average of $144.66 in March, said London-based price provider The Steel Index. The market's first-quarter spot prices compared favorably to Vale's average iron-ore sales price of $126.19 in first-quarter 2011. However, Flowcctvm brokerage in Sao Paulo said Monday that Vale may have commanded an average sales price of only $114 a ton in the first quarter this year due to the high moisture content in its ore as a result of the rains.

Vale's chief executive officer, Murilo Ferreira, said April 10 the company continues to be positive on the outlook for growth in demand for iron ore in China, which rose 6% in the first quarter from the year-earlier period. Even though China's economic growth rates may be decelerating, "the country's impact will be even more important" on world trade in future, due to the high basis on which growth rates are now calculated, Ferreira said during a presentation in Rio de Janeiro.

Vale's result should also appear lower in the first quarter after a nonrecurrent cash gain of $1.081 billion in the year-earlier period on the company's sale of aluminum and alumina assets to Norsk Hydro ASA.

Vale's results should be "soft, but [with] clearer skies ahead," said Flowcctvm analyst Renato Antunes. "We expect profitability to pick up throughout 2012, driven by higher volumes and realized prices."

According to Itau BBA's Marcos Assumpcao, Vale's shares are already "pricing in" a speeding-up in minerals and metals markets, including in China, noting that iron ore spot prices are now "very firm" at around $148 a ton.

Vale's preferred VALE5.BR shares closed 0.24% higher Tuesday at 41.80 Brazilian reais ($22.35). The stock has gained 10.26% so far this year.

Zacks Equity Research, however, warned last week that it continues "to hold a cautious outlook on Vale based on the vulnerability of rising mining taxes and inflated oil prices worldwide. Operational disruption arising out of natural disasters and regulatory delays in Brazil also keep our outlook range-bound."

-By Diana Kinch, Dow Jones Newswires, Tel: 55 21 2586 6086, diana.kinch@dowjones.com

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04-24-12 1904ET