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Iron ore rate cut 'plan' in the bag

By Jiang Wei (China Daily)
Updated: 2009-06-04 11:15

Imported iron ore being unloaded at a dock in Zhejiang province. [Zhang Heping]

China's steel industry had a new plan for talks with overseas suppliers on iron ore prices, a senior industry official was reported as saying, but insiders were split on the possible outcome of the ongoing negotiations.

Luo Bingsheng, vice-chairman of the China Iron and Steel Association (CISA), was quoted by Shanghai Securities News as saying that the association had a new plan for discussions with BHP Billiton, Rio Tinto, and Brazil's Vale and expected the talks to conclude by the end of this month. But he declined to elaborate.

Related readings:  China probes U.S. Russian steel in anti-dumping case  Chinese steel mills reject iron ore price cut  CISA: Domestic steel industry remains unprofitable  China’s March steel exports total 1.67 million tons

Japanese and South Korean steel mills and Rio Tinto last week agreed on a price cut of 33 percent for iron ore fines and 44 percent for lump iron. But CISA is aiming to take iron ore prices at least back to 2007 levels, which would imply cuts of 40 percent or more.

Luo said iron ore supply is largely surpassing demand in the international market this year - imports by Japan and South Korea are decreasing remarkably and China is the only country showing a strong demand.

Zhang Zhipeng, an analyst with AJ Securities, said Chinese mills did not have a big say in the negotiations because the market was still controlled by suppliers. He said Chinese buyers should aggressively try to diversify their supplies.

Some experts argued that China was under no pressure since the country was seeing a great surplus in iron ore imports. China's iron ore imports in the first four months exceeded actual demand by 27 million tons.

Luo also estimated that the global iron ore surplus might range between 200 million and 300 million tons this year.

Xu Xiangchun, chief information officer of Mysteel.com, said it was possible that the negotiation would drag on beyond the end of June, when last year's contract was scheduled to end.

"CISA's strong attitude is within expectations since it has insisted on larger cuts in the annual prices," he said. "But it is still hard to tell whether it can reach a 'China price' or will have to compromise finally."