The Vice President in charge of iron ore solutions at Vale told Reuters that although the company expects a decline in the global demand for steel in China, the actual situation is not as bad as some recent data suggest.
Vale executive Marcello Spinelli mentioned that despite the uncertainty of the stimulus measures that might be adopted to achieve growth targets, the Chinese economy has proved resilient, and Vale holds a "cautiously optimistic" attitude towards China, the world's largest consumer of iron ore.
Spinelli noted that although China's demand for steel is declining, it is not as pessimistic as some individual economic data show. In particular, when comparing steel and iron ore supply and demand data with real estate data, it's clear that China's demand for steel is more optimistic than some analysts predict.
In recent years, despite Vale's efforts to diversify its business through non-ferrous metals, it still heavily relies on the Chinese market. Data shows that Vale sold 190 million tons of iron ore and related products to China, accounting for about 63% of the industry's total sales.
Spinelli admitted that after some real estate developers encountered liquidity problems, there was significant mistrust towards the Chinese real estate sector among some market participants. However, many analysts or financial institutions overlook the fact that non-developer entities are actively constructing housing at higher prices, which to some extent counteracts the impact of falling house prices.
Spinelli stated that China's lower inventory of iron ore and steel not only supports market prices but also the global market demand. According to SteelHome consulting firm data, China's port iron ore inventory is about 118 million tons, the lowest level in nearly three years.
Spinelli expressed that the significant uncertainty regarding China's potential stimulus measures causes considerable volatility in some commodity prices. Still, the Chinese economy remains vibrant and is likely to continue to be robust in the future.
