Vale's CFO Cavalcanti is bullish on China iron ore demand and prices

Guilherme Cavalcanti, CFO of Vale is on record as saying that China shows no sign of falling demand for iron ore. He was speaking at the WA Business Leaders Forum in Perth, organised by The Australian and Deustche Bank. “22 new cities are being built every year in China. This will keep iron ore prices up”. He also said that his Company aimed “to invest as fast as possible” to meet its plan to double iron ore production capacity over the next five to six years. That commitment to Vale’s $24 billion investment programme for this year, reinforced by the Company's newly installed CEO, Murilo Ferreira, has also helped Vale’s shares start to recover, according to Cavalcanti. He continued, too, by adding that global prices for iron ore were today about $US170 a tonne on the spot market, “way higher than our production costs”; and they will remain at current high levels.


OTHER NEWS:

(i) Iron ore prices are under pressure for the next three month, says Standard Chartered; [Ed: and, yes, that would $5 per ton]

Iron ore prices will face “downward pressure” in the next three months because of increasing volumes from Brazil and weaker global steel demand, says Standard Chartered. There is also a risk of iron ore de-stocking in China. For example, the spot iron ore price for Indian product will be $170 a metric ton in Q3 compared with $175 a ton in Q2. “Softer steel markets in many regions have negatively impacted market sentiment. We expect modest declines in spot iron ore prices in the next three months as Brazil’s exports recover further and demand enters the off-peak season with the start of the summer holidays in Europe and the US”.


(ii) Commodity prices see their largest monthly fall in a year

Commodities recorded their largest monthly fall in a year as the European sovereign debt crisis and Chinese inflation, in particular, led to fears of a global slowdown. In May, the S&P GSCI Spot Index of 24 raw materials dropped 6.8%, the first decline since August and the most since May 2010. Silver led the way with -21%, joined by nickel and crude oil - which were both off around 10%. However, the Index rose 1.2% today. “The May sell-off is a broad-based risk averse move coming from a combination of concerns about Europe’s debt crisis, China’s inflation and US data” said H3 Global Advisors.