China to Reject Any Higher-than-Target Iron Ore Contract Offer
The country’s steelmakers are hoping for an at least 40 percent discount on contract prices.
Zhang Boling 30 April 2009
(Caijing.com.cn) China will hold firm on iron ore contract negotiations and may reject contract prices from other countries that are higher than its target price, according to China Iron and Steel Industry Association deputy chairman Luo Bingsheng.
“If the offers fail to meet our expectations, we will work hard and explore all options to realize our goal,” said Luo.
Global miners usually start talks with steelmakers in Japan, China and Europe in November to settle iron ore contract prices before the start of the Japanese fiscal year in April. The price agreed on by the first bloc of steelmakers to reach a deal with the big three iron ore producers – BHP Billion, Rio Tinto and Vale – is accepted in most years as the global benchmark.
Talks between China’s steel companies, led by Baosteel, and global miners including the big three are currently in deadlock over the extent that prices should be reduced in the current year.
Shan Shanghua, secretary general of the association, said earlier that China’s steelmakers are pushing for iron ore contract prices to be lowered to 2007 levels, meaning a 40 percent discount from last year’s contract price with the Brazilian iron ore producer and a 45 percent price decrease from the Australian contract.
Steelmakers are counting on weak global demand to bolster their negotiating position. March spot iron ore prices fell 40 percent against the value of a long-term contract ending in March 2009.
The negotiations are particularly tense this year as China’s steel prices have fallen up to 37 percent since the second half of 2008, contributing to China’s 72 major steelmakers’ combined loss of 3.3 billion yuan in the first quarter.
However, China’s total output of steel products increased 2.8 percent year-on-year to 1.4 trillion metric tons in the first quarter, the Ministry of Industry and Information Technology reported earlier, as steelmakers ramped up production in anticipation of a revival in demand triggered by the government’s 4-trillion-yuan economic stimulus. This has led iron ore miners to resist pressure to lower prices.
When the new fiscal year began with the deadlock unresolved, Shan said the association instructed Chinese mills to pay miners just 60 percent of last year’s price.
Brazilian miner Vale is already selling iron ore to Chinese customers at 80 percent of the contract price agreed last year pending a price settlement for the year to March 2010, the miner said earlier.
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China to Reject Any Higher-than-Target Iron Ore Contract Offer
The country’s steelmakers are hoping for an at least 40 percent discount on contract prices.
Zhang Boling
30 April 2009
(Caijing.com.cn) China will hold firm on iron ore contract negotiations and may reject contract prices from other countries that are higher than its target price, according to China Iron and Steel Industry Association deputy chairman Luo Bingsheng.
“If the offers fail to meet our expectations, we will work hard and explore all options to realize our goal,” said Luo.
Global miners usually start talks with steelmakers in Japan, China and Europe in November to settle iron ore contract prices before the start of the Japanese fiscal year in April. The price agreed on by the first bloc of steelmakers to reach a deal with the big three iron ore producers – BHP Billion, Rio Tinto and Vale – is accepted in most years as the global benchmark.
Talks between China’s steel companies, led by Baosteel, and global miners including the big three are currently in deadlock over the extent that prices should be reduced in the current year.
Shan Shanghua, secretary general of the association, said earlier that China’s steelmakers are pushing for iron ore contract prices to be lowered to 2007 levels, meaning a 40 percent discount from last year’s contract price with the Brazilian iron ore producer and a 45 percent price decrease from the Australian contract.
Steelmakers are counting on weak global demand to bolster their negotiating position. March spot iron ore prices fell 40 percent against the value of a long-term contract ending in March 2009.
The negotiations are particularly tense this year as China’s steel prices have fallen up to 37 percent since the second half of 2008, contributing to China’s 72 major steelmakers’ combined loss of 3.3 billion yuan in the first quarter.
However, China’s total output of steel products increased 2.8 percent year-on-year to 1.4 trillion metric tons in the first quarter, the Ministry of Industry and Information Technology reported earlier, as steelmakers ramped up production in anticipation of a revival in demand triggered by the government’s 4-trillion-yuan economic stimulus. This has led iron ore miners to resist pressure to lower prices.
When the new fiscal year began with the deadlock unresolved, Shan said the association instructed Chinese mills to pay miners just 60 percent of last year’s price.
Brazilian miner Vale is already selling iron ore to Chinese customers at 80 percent of the contract price agreed last year pending a price settlement for the year to March 2010, the miner said earlier.
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