OREANDA-NEWS. November 22, 2011. Brazilian mining giant Vale's business with China is "flowing better" as inflation in the country has started to slow down, relieving some of the pressure on the central bank, according to Vale CEO Murilo Ferreira.

The Chinese government's tight monetary policy was the main obstacle in negotiations, according to the CEO. With the decline in inflation, the government should be able to relax some of its economic measures, Brazilian paper DCI reported.

China has managed its monetary and fiscal policy with extreme competence in recent years and will continue to grow, according to Ferreira.

PRICES

The executive expects iron ore prices to be more stable next year. "We believe it will vary, but not with the same volatility shown in 2011," he said, declining to make a price forecast.

Ferreira's expectations are for the Chinese spot market price. The performance is supported by fairly strong Chinese demand amid signs that Beijing is close to changing its prudent monetary policy, he said.

China's central bank said it will make adjustments, if necessary, fueling expectations that the bank will take action to combat a possible economic slowdown, according to the report.

INVENTORIES

As a result, Chinese steel mills began to rebuild iron ore stocks after market prices reached their lowest level in 22 months of USD 117/t at end-October.

Iron ore rose to USD 147.20/t on November 16, the highest price since October 19. According to sector players in China, many steel mills are buying ore, even if stocks are not so low, because they are already predicting price increases, the report said.

Rio de Janeiro-based Vale is the world's largest iron ore producer and exporter.