China Will Insist On Deeper Iron Ore Price Cuts This Year-Executive
May 26 2009 - 7:25AM
Dow Jones News
Chinese steel industry officials late Tuesday said they won't go
back on their demand for a minimum 40% cut in 2009-10 iron ore term
prices despite Anglo-Australian miner Rio Tinto Plc (RTP) reaching
a deal with Japan's Nippon Steel Corp. (5401.TO).
"The prices reached by Japan steel makers and Rio are
unacceptable as they are higher than current spot ore prices in
China and are to the disadvantage of long-term contract (users),"
said Tian Zhiping, vice general manager of Hebei Iron & Steel
Group, China's second-largest steel maker by output.
"We hope to complete the talks by the end of June, and that
should be based on both parties' sincerity," he said.
In a statement Tuesday, 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.
The deal that saw 2009-10 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.
Shan Shanghua, secretary-general of the China Iron and Steel
Association, told reporters earlier in the day that CISA was still
studying the issue, and had not reached a conclusion on a response
to the Rio Tinto-Nippon deal.
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.
Meanwhile, 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.
The Rio Tinto-Nippon deal is the first this 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.
BHP is widely expected to be the next to set terms with Japan.
Vale has said it would wait to see the terms secured by Rio Tinto
and BHP before concluding its own price talks.
(Chuin-Wei Yap and Juan Chen in Beijing contributed to this
report)
-By Yue Li Dow Jones Newswires; 8610 6588 5848;
yue.li@dowjones.com