Saturday 20 June 2009

Steel mills seek accord on spot iron ore price

The China Iron and Steel Association (Cisa) will ask steelmakers to agree on a price for spot iron ore to avoid a bidding war, should long-term contract talks fail with the world’s largest suppliers.

1 comment:

Guanyu said...

Steel mills seek accord on spot iron ore price

Bloomberg in Shanghai
20 June 2009

The China Iron and Steel Association (Cisa) will ask steelmakers to agree on a price for spot iron ore to avoid a bidding war, should long-term contract talks fail with the world’s largest suppliers.

Auctions of iron ore on the spot market set “speculative” prices, general secretary Shan Shanghua said yesterday. The association is seeking to stop Chinese mills and traders from taking part in auctions now, he said, without elaborating.

The mainland, the world’s biggest buyer of iron ore, has rejected a 33 per cent price cut agreed by Rio Tinto and Nippon Steel Corp and called for contract prices to drop as much as 45 per cent. Talks between mills and suppliers are deadlocked, China Minmetals Corp said on Thursday.

“If the contract price talks fail, there should be a guide price for spot ore,” Mr. Shan said. “Mills shouldn’t negotiate individually on spot prices.”

Steelmakers should also agree on how often they set prices, he said.

Spot iron ore prices, which exclude freight charges, at major mainland ports have risen 23 per cent in the past two months to US$73 per tonne, according to Steel Business Briefing.

“Setting one spot price is absolutely impossible,” said Hu Kai, a Shanghai-based analyst with Umetal Research Institute. “A free spot market won’t follow a single price. Actually, miners and many mills are happy with the spot trading now.”

“China may agree to a 33 per cent price cut” with possible revisions in later quarters, Mr. Hu said.

“Or Rio Tinto may agree to a price cut bigger than 33 per cent, also on a quarterly basis.”

Cisa also would not agree to the 28 per cent price cut agreed between Brazil’s Vale, the world’s largest iron ore supplier, and Japanese and South Korean mills, Mr. Shan said.

The association replaced Baosteel Group Corp, China’s biggest mill, this year as the key negotiator in price talks, Mr. Shan said. Rio and BHP Billiton are the world’s No 2 and No 3 iron ore suppliers, respectively.

China was still “open” for contract price talks with any of the suppliers, though it still would not accept just a 33 per cent price cut, Mr. Shan said.

He met Vale executive director Jose Carlos Martins and Fortescue Metals Group executive director Russell Scrimshaw this week.