Chinese demand seen boosting Vale shares — CFO

RIO DE JANEIRO (Reuters) – 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 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.

On Tuesday, Goldman Sachs 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 up 0.2 percent at 44.86 reais in early trade, still more than 14 percent 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 company and should help in the recovery of the share price.

Investors and analysts have been increasingly concerned with government intervention in the company. They fear it will erode Vale’s bottom line by pushing it into areas that are not its core business of mining but seen as beneficial for the overall economy and the government.

($1=1.584 reais) (Reporting by Brian Ellsworth; Writing by Reese Ewing, editing by Dave Zimmerman)