China to settle iron ore price talks by month-end Steelmakers lower demand for cutting rates

Print this page Posted on : 07-04-2009 by recycleinme.com

The mills, which had demanded a cut of as much as 45 per cent, are ready to discuss a reduction of between 33 and 40 per cent.

July 3

Chinese steelmakers, the world's biggest, aim to conclude annual contract iron ore talks by the end of this month and may consider trimming their price cut demands, a company executive said.

Some of the annual contracts, which ended June 30, still have a one-month grace period, Mr Tian Zhiping, Vice-President of Hebei Iron & Steel Group, said in a phone interview. (In view of the delay in the deal, Indian iron ore prices gained to $62-65 f.o.b on increased Chinese enquiries.)

The two sides should go on with the formal talks and settle the prices as soon as possible.

Unlikely to budge

The mills, which had demanded a cut of as much as 45 per cent, are ready to discuss a reduction of between 33 and 40 per cent, Caijing magazine reported.

Rio Tinto Group, the world's second-biggest exporter of the ore, is unlikely to budge from the 33 per cent drop it agreed in May with Japanese steelmakers, said Umetal Research Institute analyst Mr Hu Kai.

Rio is more willing to sell to the spot market now because Chinese steelmakers have lost their credibility in honouring the long-term contracts, said Shanghai-based Mr Hu. Some mills have started to buy ore at a provisional 33 per cent price cut level after cash prices rose, he said.

Cash prices gained 20 per cent to $78.20 a tonne since Rio settled contract prices with Japanese steel mills on May 26, according to the Steel Business Briefing. This includes shipping costs of $17.75, according to the Baltic Dry Index. The contract price for the year to March 31 accepted by mills in Japan, Korea and Taiwan is about $61 a tonne of ore from Australia.

Rio's stance

Whether we would agree to a cut less than 40 per cent is dependent on Rio's stance, Hebei Steels' Tian said. It hasn't offered a cut bigger than 33 per cent.

Rio said June 30 that some contracts may revert to the spot market from the start of this month. Rio Tinto has long been a supporter of the benchmark system but if customers choose to buy on the spot market instead they will, Rio's Perth-based spokesman Mr Gervase Greene said.

Contract ore prices, effective from April 1, fell for the first time this year after rising for six straight years mainly because of Chinese demand. Mills, including Baosteel Group Corp, had delayed or cancelled contract shipments since September as slowing demand from automakers and builders forced them to trim production.

Source : Business Line