China Steel Mills Need Iron Ore Price Cut To Exceed 33%-Assoc
May 31 2009 - 12:07AM
Dow Jones News
China's Iron and Steel Association maintained its campaign to
slash 2009-2010 iron ore term prices by 40% or more, putting out a
report on its Web site Sunday that rounded up opinions from a
string of unidentified Chinese mill executives.
"Many mills have said it would be difficult to accept a 33% cut,
and they await a bigger cut," the report said, later citing similar
sentiment from officials from Wuhan Iron and Steel International
Trading Corp. and Baosteel Group Corp.
Anglo-Australian miner Rio Tinto Plc (RTP) agreed last week on
price cuts with Japanese and Korean mills that at their baseline
was 33% off last year's terms.
Chinese steel interests say a 33% discount would mean ore prices
are still higher than 2007 levels by $10 a metric ton, amid weaker
demand for steel, the report said.
But mills and traders may have to accept a 33% cut if spot iron
ore prices move higher, an unidentified official from Shandong
Laiwu Steel International Corp. was quoted as saying in the
report.
The Laiwu official added that spot prices aren't likely to be
pushed higher, because "spot prices are primarily decided by
demand, and currently steel demand has not recovered."
The quandary for Chinese negotiators is that their position
depends on projecting a sense of weak demand, even as policymakers
guide the Chinese economy toward recovery.
The numbers in May didn't strongly favor the Chinese side.
Spot delivery prices for Indian ore rose slightly in May, by
about CNY10/ton for 63% fines and CNY5/ton for 62% fines.
Steel prices have also risen since late April, according to the
China Iron and Steel Association's data.
Industry analysts believe steel demand is tentatively recovering
because of the seasonal resumption of building activity,
stimulus-led infrastructure projects and the auto sector's
revival.
Spot prices are currently 30%-40% below last year's term
rates.
-By Chuin-Wei Yap, Dow Jones Newswires; 8610 6588 5848;
chuin-wei.yap@dowjones.com