CVRD: China to Fuel Demand for Iron Ore

Posted 15 March 2006 @ 07:28 pm EET     Print     Reprint     E-Mail     Comments

SAO PAULO, Brazil (AP) - Robust economic growth and urbanization in China will continue to fuel strong long-term demand for iron ore, an executive with the world's largest iron ore producer said Wednesday.

"We don't see any reason for China to reduce its rate of growth," said Fabio Barbosa, chief financial officer of Brazil's Companhia Vale do Rio Doce SA.

Barbosa noted the Chinese government's urbanization strategy, which he said will move 300 million people from the country's rural interior to cities.

Structural change in China is generating intense demand for products, including all types of metal, and is expected to continue for the foreseeable future, Barbosa said. Iron ore is the raw ingredient used to make steel.

Already in 2006, steel prices are trending upward in Asia, Europe and the United States. Barbosa said. More important, spot market iron ore prices have maintained higher prices compared with long-term contract prices.

"Expectations are for sustainable, long-term economic growth with minor short-term fluctuations," Barbosa said. "The fundamentals of growth are extremely strong."

Barbosa said CVRD forecasts global gross domestic product growth of 4 percent in 2006. China's growth was pegged at 10 percent in 2006, similar to the Asian titan's past expansion levels.