Demand for iron ore from China, the world's largest consumer, has not slackened despite a slowdown in other parts of that economy, an executive with Brazilian mining company Vale said on Tuesday.
Although the Chinese government has clamped down on credit to fight inflationary pressures, infrastructure and major construction works appeared to be unaffected, said Vale's chief financial officer, Guilherme Cavalcanti.
"China is not showing signs of decline in consumption of iron ore, mostly because of its investment in civil construction," Cavalcanti said during an industry conference.
"China builds 22 new cities each year, which requires steel and other minerals. So we believe that there has been a slowdown of consumption to control inflation, but that's not what we're seeing in the area of civil construction."
On Tuesday, Goldman Sachs (NYSE: GS - news) said in a research note that it raised its forecast for iron ore prices in China for 2012 and 2013 to $160 and $145 a tonne respectively due to tight supply-demand fundamentals. Previously the forecast was for $145 and $110 a tonne.
Cavalcanti said the company's stock should recover from recent falls on the Chinese demand, as well as a steady investment plan under the company's new leadership.Shares of the miner, the world's biggest producer of iron ore, were down 0.3 percent at 44.65 reais in afternoon trade, off a high of 52.94 reais in early January.
The stock has dropped since January as the government pushed out former Chief Executive Roger Agnelli in an effort to bring the company better in line with government industrial policy.
Murilo Ferreira became the new CEO earlier in May and said there would be no changes to the company's business plan and that he would work to improve a strained relationship with the government.
Cavalcanti said the entrance of Ferreira was "sign of stability" for the market and should help boost the share price and bring the company's valuation more in line with rival Australian miners BHP Billiton (Hamburg:BHP1.HM - news) and Rio Tinto (Berlin: CRA1.BE - news)
"As investors see that Vale is continuing with its investment plans and its strategy ... people will change their positions and that will bring those multiples back into balance," said Cavalcanti.Investors and analysts have been concerned with government intervention in the company. They fear it will erode Vale's bottom line by pushing it into areas such as steelmaking that offer lower returns for investors. ($1=1.584 reais) (Reporting by Brian Ellsworth; Writing by Reese Ewing; Editing by Dave Zimmerman and Tim Dobbyn)