According to a Reuters report, Brazilian miner Vale SA’s vice president of iron ore solutions, Marcello Spinelli, said that China’s steel demand is declining, but not to the extent that some indicators suggest. He said that Vale is “cautiously optimistic” about the world’s largest consumer of iron ore, as China’s economy has proven resilient, despite uncertainties surrounding possible stimulus measures to achieve growth targets.
Spinelli acknowledged significant distrust among analysts about China’s building sector, following liquidity problems for some real estate developers. However, he said that many analysts overlook that non-developer entities are actively constructing homes at elevated levels, partially offsetting the decline. He also said that low iron ore and steel inventories offer support for the market.
Iron ore prices remain above $110 per ton
Iron ore prices are still holding above $110 per ton, but far from this year’s peak near $130 and last year’s high of $150. Spinelli said that there is a lot of volatility in the market because nobody knows what the central government will decide about stimulus. “We have to wait a bit, but China is there, alive, economically resilient and it’s still going strong,” he said.
Vale is heavily dependent on sales to China, even as it works to diversify with its base metals unit. Last year, China bought 190 million tons of iron ore and pellets from Vale, representing around 63% of total sales in those segments, according to company data.
Vale expects moderate slowdown in China’s growth
Spinelli said that Vale is not worried about a hard landing for China’s economy, as some analysts have predicted. He said that Vale expects a moderate slowdown in China’s growth over the next five to 10 years, but in a way that is already foreseen. “We’re cautious optimists, that’s what we are. There is a stabilization of the economy at a very high level, and with some adjustment, yes, (growth) will slow moderately,” he said.
Vale is also confident about its own performance, as it recovers from the impact of the deadly Brumadinho dam collapse in 2019, which killed more than 250 people and disrupted its operations. The company aims to produce between 315 million and 335 million tons of iron ore this year, up from 300.4 million tons in 2020.
