Investors at Vale SA (NYSE: VALE) are paying near record prices to protect their shares of the world’s largest miner after China cut down on its imports. (by the way, Jim Chanos had already made his bearish call for iron here and Vale here)

Amid speculation about its next CFO, Vale SA saw five times its average daily put volume last Monday – a sign of market fear. As of November 23rd, the 3-mo VALE put options cost 8.8 points more than the calls, up 4.9 points from August. The difference reached a record 9.9 points in October 27. The bearish’ to bullish’ ratio was the highest in one-year at 1.1 compared to the June low of 0.78.

Vale faces slower growth after China reduced its imports of raw steel in October to its lowest in eight months. The miner’s share prices and China’s growth rates have been strongly correlated in 23 of the last 35 quarters, Bloomberg data show.

There is a lot of talk in the market about the possibility for China to reduce steel production and, if this is the case, Vale is vulnerable

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