Vale SA logo photographed on August 7, 2017 in Rio de Janeiro, Brazil. Taken on August 7, 2017.Reuters/Ricardo Moraes/File photo Acquisition of license rights
RIO DE JANEIRO, Aug 29 (Reuters) – Brazilian mining company Vale SA (VALE3.SA) sees a decline in steel demand in China, the world’s biggest producer, but the situation is It’s not as dire as the indicators suggest, said the company’s iron ore vice president. The solution told Reuters.
Vale executive Marcello Spinelli said that despite uncertainty over the possibility of stimulus measures to meet growth targets, Vale remains the world’s largest iron ore consumer as China’s economy proves its resilience. He said he was “cautiously optimistic” about the country.
“We can see that there is demand (for steel). It’s down, but not as much as some analysts would say in individual metrics,” Spinelli said. “When you compare this to the number of properties (in the construction sector), you see this discrepancy.”
Despite Vale’s efforts to diversify its base metals sector, it remains heavily dependent on sales to China. China bought 190 million tonnes of iron ore and pellets from Vale last year, accounting for about 63% of the division’s total sales, according to company data.
Spinelli acknowledged that there is significant distrust in China’s construction sector among analysts following liquidity problems among some real estate developers. But he said many analysts have overlooked the fact that entities other than developers are aggressively building high-rise housing, partially offsetting the decline.
He also said low iron ore and steel inventories were supporting the market.
Iron ore inventories at Chinese ports are at about 118 million tonnes, the lowest level in nearly three years, according to data from consultancy Steelhome. Prices are still above $110 per tonne, but far from this year’s peak of around $130 and last year’s high of $150.
“It’s very unstable because no one knows what the central government is going to decide (on stimulus),” Spinelli said. “We’re going to have to wait a little bit, but China is there, and it’s alive, and the economy is going strong. It has been resilient and is still doing well.”
“We’re cautious optimists, that’s our nature. The economy is stable at a very high level and with some adjustment, certainly (growth) will continue over the next five to 10 years. It’s going to be a gradual slowdown, but in some ways, that’s already predicted,” Spinelli said.
Report by Marta Nogueira. Written by Peter Frontini.Editing: Leslie Adler
Our criteria: Thomson Reuters Trust Principles.