China’s underestimated appetite for infrastructure will bolster iron ore producers grappling with prices languishing at the lowest in at least six years, according to a consultant to Pacific Investment Management Co.
The world’s biggest commodities buyer’s need to deliver everything from new transport links to new telecommunications systems should support medium-term demand, Gene Sperling said Monday in an interview in Kalgoorlie, Western Australia.
China’s leadership is preparing fresh fiscal spending to ensure that signs of economic weakening don’t put its 2015 growth target out of reach. The government has flagged construction of a modern underground pipe system in big cities and airports in central and western regions as priorities.
“China’s demand for infrastructure may be greater than some people think -- those who are predicting a rather tough, hard landing,” said Sperling, who was appointed in January as a consultant to Pimco, which manages about $1.52 trillion of assets globally. “Because China will be quite committed to 7 percent growth, I think China will be relying on different types of infrastructure investments.”
Iron ore has been whipsawed in recent weeks as investors weigh lower inventories at ports in China against signs that the economy is slowing. Prices fell to a six-year low in early July before rallying into a bull market at the end of the month.
Ore with 62 percent content in Qingdao fell 4 percent to $53.41 a dry ton on Friday, according to Metal Bulletin Ltd.
Sperling is a former director of the U.S. National Economic Council and a former economic adviser to two presidents.
Exporters should also develop longer-term plans to meet India’s likely growing need for metals, Sperling said at the Diggers & Dealers mining forum.
“India can’t stay this small in terms of demand for the next 10 to 20 years, it’s just impossible,” he told reporters.
India’s Prime Minister Narendra Modi is seeking to add 20 million homes to replace the nation’s crowded slums as part of his promised economic reform agenda, while his government in February announced plans to boost infrastructure spending
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