China Assoc: Won't Respond To Rio-Nippon Iron Ore Deal Now
May 26 2009 - 6:00AM
Dow Jones News
Chinese steel industry officials late Tuesday said they haven't
reached a decision on a response to Anglo-Australian miner Rio
Tinto Plc's (RTP) iron ore price deal with Japan's Nippon Steel
Corp. (5401.TO).
The deal that saw 2009-10 iron ore prices cut between 33% and
44%, threatens to undermine China's demand for deeper cuts and its
position as benchmark setter for Asian term prices.
"There's a possibility we'll persist with our request for price
cuts of 40%-45% (from last year's term prices), but whether or not
that will happen, I can't tell you now," said Zou Jian, an
executive director at the China Iron and Steel Association.
Separately, Shan Shanghua, the association's secretary-general,
told reporters that CISA is still studying the issue, and had not
reached a conclusion yet.
In a statement earlier in the day, Rio Tinto said it has agreed
on a price of 97 cents per dry metric ton for Pilbara and
Yandicoogina iron ore fines, compared with $1.446 last year, and
$1.12 a ton for lump, down from $2.0169 last year.
This is the first deal of the year and could become the
benchmark for the other two big miners, BHP Billiton Ltd. (BHP) and
Companhia Vale do Rio Doce (RIO), which are continuing negotiations
with steel mills.
Industry officials close to negotiations said JFE Steel Corp., a
unit of JFE Holdings Inc. (5411.TO)), Sumitomo Metal Industries
Ltd. (5405.TO) and Kobe Steel Ltd. (5406.TO) have also accepted the
same terms as Nippon, with other Japanese mills expected to follow
suit, effectively making this the official Japanese price for the
year. .
Ding Shouhu, chief negotiator for Baosteel Group Corp., said he
needed to confirm terms of the Rio-Nippon deal before
commenting.
Baoshan Iron & Steel Co. (600019.SH), or Baosteel, is the
biggest steel maker in China and has been leading the Chinese side
in this year's price negotiations.
Ding declined to confirm if China would still stick to its
demands from miners for a 40%-45% price cut.
Last Thursday, Shan had said the Chinese side would demand a 45%
price cut from Rio Tinto and a 40% cut from Brazilian miner
Vale.
BHP is widely expected to be the next to set terms with Japan,
after Rio Tinto's announcement Tuesday. Vale has said it would wait
to see the terms secured by Rio Tinto and BHP before concluding its
own price talks.
-By Chuin-Wei Yap and Juan Chen, Dow Jones Newswires; 8610 6588
5848; chuin-wei.yap@dowjones.com, juan.chen@dowjones.com