BRASILIA, Jan 21 (Reuters) - The fundamentals of the Chinese economy remain solid and the recent drop in iron ore prices is temporary, Murilo Ferreira, chief executive of Vale , the world's largest iron ore miner, said on Tuesday.
Iron ore prices on the Chinese spot market have fallen 8.2 percent since the beginning of the year to $123.20 a tonne, their lowest level in six months, according to Steel Market Intelligence newsletter.
"There was a recent toughening in credit policy in China and the steel companies were certainly affected," Ferreira told reporters after a meeting at Brazil's Mines and Energy Ministry.
"The companies have ended up working with lower stocks, but that is a transitory position," he said.
China is the world's largest steelmaker and also the largest purchaser of iron ore, the main raw material for making steel. The economy of China, Vale's largest market, grew 7.7 percent in 2013, its slowest performance in 13 years.
Chinese steel and iron ore futures slid on Tuesday, reflecting thin demand from the world's top consumer of the two commodities that has also resulted in spot iron ore prices falling by 7 percent this month.
Tighter access to loans and slow steel demand are keeping Chinese steel makers from replenishing iron ore inventories ahead of the week-long Lunar New Year break.
Vale, the world's No. 2 mining company, announced in December it had lowered its investment budget for a third straight year to focus expansion on its main iron ore business.
Ferreira said the S11D, or Serra Azul, mine expansion at its giant Carajas iron ore complex in the Amazonian state of Para in Brazil is advancing rapidly and work there is 48 percent completed.