UPDATE: Posco Agrees On 33%-44% Iron Ore Price Cut With Rio
May 28 2009 - 12:26AM
Dow Jones News
South Korea's Posco (005490.SE) said Thursday it has struck a
deal with Rio Tinto Ltd. (RIO.AU) for a 33%-44% cut in iron ore
term prices for the year that started April.
Posco had agreed on a 33% cut on iron ore fines at $58.2 a
metric ton and a 44% cut on iron ore lumps at $68.88/ton from the
Australian miner, the company said in a statement.
"But talks with two other major iron ore suppliers - BHP
Billiton and Vale - are still going on," company spokeswoman Choi
Youn-joung said.
Analysts expect the deal with Rio to affect the price talks with
BHP Billiton Ltd. (BHP.AU) and Brazilian mining giant Vale S.A.
(VALE).
"Posco is expected to conclude the remaining deals at same or
similar levels as Rio," Shin Yoon-sik at Meritz Securities
said.
Though Posco May 15 cut the prices of all of products, including
mainstay hot-rolled coils, stainless steel and shipbuilding plates,
it will likely to post an improved operating profit in the third
quarter, analysts said.
"That's because Posco lowered product prices under the condition
of a 'conservative' 20% cut in iron ore contract prices," said Moon
Jeong-up with Daishin Securities.
Posco's operating profit for the three months ended March 31
plunged 71% on year to KRW373 billion due to low demand and high
costs arising from a weaker won.
Rio Tinto Tuesday signed a deal with Japan's Nippon Steel Corp.
(5401.TO) for a 33%-44% drop in iron ore term prices for the
2009-10 contract year that started April 1.
Posco, the world's fourth-largest steelmaker by output, had
asked suppliers to cut iron ore prices by 50%.
-By Kyong-Ae Choi, Dow Jones Newswires; 822-2198-2236;
kyong-ae.choi@dowjones.com