China's Steelmakers Gaining Leverage in Ore Bargaining

Resource from: CBCC Likes:2905

Aug 18,2010

With the gradual reverse of supply-demand situation of iron ore, China's steel producers will have more bargaining power, according to the China Iron & Steel Association (CISA). Since early July, iron ore prices have started an upward trend as the steel market is rebounding. The world's top three iron ore giants, Rio Tinto, BHP Billiton and Vale SA, are taking this opportunity to push forward their new pricing regime. The narrowing gap between iron ore contract prices and spot prices will not impact the market much. "But the key problem is that the new pricing mechanism provides larger room for iron ore speculation," one analyst said. On Aug. 12, the CFR spot price of Indian 63.5 percent iron ore fines increased to 155 to 157 U.S. dollars per ton, while some market rumors said that Rio Tinto had reached the third-quarter contract price of 147 U.S. dollars per ton with Japanese and South Korean steel mills. Luo Bingsheng, vice chairman of the CISA, said that the iron ore suppliers are currently seeking short-term super profits, violating their cooperation with steel producers and worsening the fluctuation of iron ore market. However, the CISA also predicts that China's steel producers will be able to reject the ore giants' new price mechanism due to the reversing iron ore supply-demand situation. Data from the association showed that China produced more iron ore for steel mills in the second quarter of 2010. China's iron ore imports have been declining for three consecutive months from April to June while domestic iron ore output increasing 37.6 percent over the first quarter.

(CBCC)

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