Fortescue Metals Group expects the iron ore price to rebound in the "short term", with Fortescue chief executive Nev Power dismissing concerns that the depressed commodity price will remain low for an extended period.
Speaking to the Diggers & Dealers conference in Kalgoorlie today, Mr Power said the Chinese Government had inflation under control, and he expected stimulus measures to begin to lift steel production activity shortly.
"We're seeing focus turn to GDP growth. Their target is around 7 to 8 per cent, and we're seeing signs such as a reduction of interest rates and reduction of required reserve ratios already," he said.
"In addition to that we've seen a number stimulus packages being announced for the regions and a stated desire to develop the central and western regions and continue the urbanisation and infrastructure build," he said.
Iron ore prices have tumbled since April, falling from about $147 per tonne to less than $120/t in recent weeks.
Analysts have said a sustained lower iron ore price could put pressure on Fortescue's balance sheet, and this week the iron ore giant topped up its funding options with a $1.5 billion short term debt facility to cover additional costs in its Pilbara expansion plans.
Mr Power said the recent iron ore price weakness was a function of an "overshoot in capacity" at Chinese steel mills, which he said had been producing at "record levels" of about two million tonnes per day for the last six months.
"There are already signs the steel inventory is reducing. We've seen recent soft iron ore prices on the back of destocking from a number of the mills, and I would expect that once those stocks have run down we start to see a kick back particularly given that the (iron ore) price is now lower than the highest cost Chinese iron ore producers," he said.
"I fully expect to see that rebound back into a more sustainable range in the short term because of the high cost of domestic production and also the mills needing to restock."