New-round negotiation on iron ore price likely to start soon

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Monday, 02 February 2009

China is likely to kick off its negotiation with the world's iron ore giants on iron ore prices after the Spring Festival, Chinese Lunar New Year, according to market guess. Baoshan Iron & Steel Co., Ltd., China's largest steel company and China Iron and Steel Association (CISA), on behalf of Chinese steel enterprises, are negotiating with the world's three iron ore giants, namely Rio Tinto, BHP Billiton and CVRD on the purchasing price of iron ore. Informed sources disclose that China and the world's three iron ore giants diverged over the price level for 2009 and the pricing method.
CVRD only agreed to cut the price by 10 percent, while China insists on a 40 percent price cut. Besides, China requires new contracts to take effect as of Jan. 1, instead of April 1 in the past, in a bid to cut the time of high prices by three months; while
BHB Billiton Ltd. strongly proposes pegging of the pricing method to index, to facilitate operation of prices.
The three iron ore giants are delaying time in hope of turnaround of economic situation and warm-up of steel market, which will boost up prices.
However, Liu Jiajun, a senior analyst of steel industry, reckoned that the price of iron ore would further drop for at least 3-5 years, as the sector has entered into a long-term buyer's market.
The long-term agreed price of iron ore grew by over five folds in 2008 as compared in 2001.
Source: Xinhua