China reportedly to concede on iron-ore pricing

Discussion in 'Wall St. News' started by maxitronixy, Jul 2, 2009.


    By John Letzing, MarketWatch
    SAN FRANCISCO (MarketWatch) -- The China Iron & Steel Association has backed down from its hard line on iron-ore prices and is prepared to discuss a less-than-hoped-for 33% reduction on benchmark ore this year, according to reports Thursday.

    Last month, Australian iron ore exporter Rio Tinto Plc. /quotes/comstock/13*!rtp/quotes/nls/rtp (RTP 166.98, +3.00, +1.83%) and Japan's Nippon Steel /quotes/comstock/!5401 (JP:5401 366.00, -4.00, -1.08%) had established a deal cutting iron ore prices by 33%, effectively establishing a benchmark. But Chinese steel mills including Baoshan Iron & Steel /quotes/comstock/28c!e:600019 (CN:600019 7.28, -0.07, -0.95%) resisted, instead aiming for price reductions of 40% or more. See full story on China steel mills' iron-ore negotiations.

    CISA, a group that includes the country's major steel mills, had also initially resisted the price cut, demanding cuts of 40% to 45%, according to a report in the Australian.

    However, "Rising demand for imported iron ore in China has undermined CISA's efforts to strike a hard bargain," the Australian reported.

    CISA represents the 72 main steelmakers in the country, who together account for up to 75% of Chinese production.

    Steel makers have been touchy about price cuts, after negotiations last year resulted in a more than doubling of prices just before global demand collapsed.
    John Letzing is a MarketWatch reporter based in San Francisco.

    When the sale of Australlian minning companies were refused, the Aus goverment knew the chinese would have no choice but to accept the outcome?
    I would have expected them to collasp under pressure of china?
  2. China's steel mills say 'no' to Rio-Nippon ore price standard

    HONG KONG (MarketWatch) -- Chinese steel makers are set to reject a one-third cut in iron-ore prices this year agreed to between Rio Tinto Plc and Japanese steel makers, saying the reduction is too small given the demand outlook, according to reports Wednesday.

    The development comes a day after Rio Tinto /quotes/comstock/13*!rtp/quotes/nls/rtp (RTP 166.98, +3.00, +1.83%) /quotes/comstock/22x!e:rio (AU:RIO 52.12, +0.52, +1.01%) and Japan's Nippon Steel /quotes/comstock/!5401 (JP:5401 366.00, -4.00, -1.08%) inked a deal Tuesday to cut iron ore prices by 33%, establishing a benchmark that is believed to act as the official Japanese price for the year.

    Baoshan Iron & Steel /quotes/comstock/28c!e:600019 (CN:600019 7.28, -0.07, -0.95%) is leading the Chinese mills' pushback against the deal, according to a Reuters' report. It and other Chinese steel makers are instead seeking price reductions of 40% or more for iron-ore deliveries this year, the report said.

    The China Iron and Steel Association, an industry group that includes the nation's major steel mills, has also given a thumbs down to the one-third cut and will soon release a statement, the report said.

    Rio's agreement with Nippon Steel will set a benchmark of 97 U.S. cents per dry metric ton for iron ore from the company's Pilbara and Yandicoogina mines. Another type of iron-ore will see its price cut by 44%.

    JFE Holdings /quotes/comstock/!5411 (JP:5411 3,200, -50.00, -1.54%) /quotes/comstock/11i!jfeef (JFEEF 33.16, +0.09, +0.29%) , Sumitomo Metal Industries /quotes/comstock/!5405 (JP:5405 258.00, +1.00, +0.39%) and Kobe Steel Ltd. /quotes/comstock/!5406 (JP:5406 178.00, -2.00, -1.11%) /quotes/comstock/11i!kbstf (KBSTF 1.80, -0.15, -7.69%) have accepted the terms, and other Japanese steel makers are also expected to agree to the pricing standard, Dow Jones Newswires reported.

    Chinese mills usually adhere to pricing benchmarks established by their Japanese counterparts but are less inclined to follow suit this year after amassing huge stockpiles of the industrial commodity in the last three months.

    Many steel makers are touchy about the issue after protracted negotiations last year ended with an agreement to accept a more than doubling in prices shortly before global demand collapsed.

    Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.