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Energy: Melters may ask for 82% iron ore price cut

By Yu Hongyan (chinadaily.com.cn)
Updated: 2008-12-09 15:50

Chinese steelmakers should demand an 82-percent cut of the import iron ore price to reflect the plummeting steel prices as the latter has tumbled by the same amount to the lowest level in 14 years, a senior industry official said.

"The iron ore price should change in line with that of steel products," Shan Shanghua, secretary of the China Iron & Steel Association (CISA) was quoted by the Securities Daily as saying.

Steel product prices have fallen to 1994 levels due to slumping demand as a result of the global economic slowdown.

Rio Tinto, the world's second-largest iron ore exporter, priced the raw material at $92.58 per metric ton this year, or 82 percent lower than the $16.69 per metric ton it charged in 1994.

"The iron ore price must be adjusted accordingly," CISA's Shan said.

He said the industry association is planning to demand a substantial price cut from major iron ore suppliers to reflect the changes.

China's steel industry dived into the red in the first 10 months of this year, according to CISA, due to sluggish exports and weakening demand in domestic auto and construction sectors.

With iron ore piling up at ports, steelmakers may postpone iron ore imports if the situation continues, Shan said.

Anhui-based Masteel and Nanjing-based Nanjing Iron & Steel Union have already suspended iron ore import plans.

The world's top three iron ore providers, Brazil's Vale, Australia's Rio Tinto and BHP Billiton, accounting for three-quarters of the global iron ore shipments, have all announced cuts in iron ore production.

Vale announced in October it would cut iron ore production by 10 percent and shut down two plants late last month.

Rio Tinto later said it would also cut 10 percent of its iron ore production and mulled postponing projects in western Africa.

Last month BHP Billiton gave up its yearlong acquisition bid for Rio Tinto, citing worries over the iron ore market, and investment bank Merrill Lynch predicted that the world's largest mining company may cut one-quarter of its iron ore production.