UPDATE: China Assoc: Won't Follow 33% Iron Ore Price Cut
May 31 2009 - 6:17AM
Dow Jones News
China's steel industry association said Sunday it won't follow
the 33% iron-ore price cut reached between Anglo-Australian miner
Rio Tinto Plc (RTP) and Japan's Nippon Steel Corp. (5401.TO).
The 33% price cut "will result in overall losses among China's
steelmakers," said the China Iron & Steel Association in a
statement on its Web site.
The price cut doesn't truly reflect this year's "changing
supply-and-demand conditions in the international iron ore market,"
said CISA.
Meanwhile, it also doesn't represent the relationship between
ore miners and steel makers that is based on interests sharing and
mutual benefits, the association said in the statement.
Tian Zhiping, vice general manager of Hebei Iron & Steel
Group, said earlier this week that Chinese steel mills "hope to
complete the talks by the end of June, and that should be based on
both parties' sincerity."
Hebei Iron is the country's second-largest steel maker by output
and is in the iron ore negotiation team led by the CISA.
However, the Chinese steel industry is facing some pressure from
miners on accepting the price cut.
Fortescue Metals Group Ltd. (FMG.AU) said Thursday Chinese steel
makers will be stuck with paying spot prices "for all time" if they
don't accept the benchmark price struck between Rio Tinto Ltd.
(RTP) and Nippon Steel Corp. (5401.TO).
Tuesday, Rio Tinto said it has agreed on a price cut between 33%
and 44% with Japanese steel maker Nippon Steel.
South Korean steel maker Posco (005490.SE) also agreed Thursday
to a price cut with Rio Tinto, also 33%-44% lower than the previous
contract price.
The prices agreed between Rio Tinto and Nippon Steel and now
Posco represent the first downward movement in contract prices in
seven years, reflecting weaker demand from steel markers hit by a
global recession.
These are the first two first deals of the year and could become
the benchmark for the other two big miners, BHP Billiton Ltd. (BHP)
and Vale S.A. (VALE), which are continuing negotiations with steel
mills.
-Yue Li in Shanghai and Ross Kelly and Alex Wilson in Melbourne
contributed to this story, Dow Jones Newswires; (8621) 6120 1200;
yue.li@dowjones.com