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Baosteel Appoints Iron Ore Negotiator as Prices Surge (Update1)
Jan 15,2010 15:56CST
industry news

Jan. 15 (Bloomberg) -- Baosteel Group Corp., China's biggest steelmaker, named Wang Liqun as its new chief negotiator for iron ore contract talks, an executive said, amid forecasts that prices may surge as much as 50 percent.

Wang, general manager of the raw material processing center at Baosteel's Baoshan Iron & Steel Co., will replace Ding Shouhu, said a Baosteel executive who declined to be identified because of company policy. Ding was the chief negotiator for the Shanghai-based steelmaker the past two years.

The appointment, along with a new negotiator for Rio Tinto Group, the second-largest iron ore exporter, indicates that Chinese steelmakers and miners want to start a fresh slate after failing to agree prices last year. Chinese police have detained four Rio executives, including Australian Stern Hu, since July for allegedly stealing commercial secrets.

"Baosteel's new negotiator faces a hard task as China has almost no bargaining power," said Hu Kai, a Shanghai-based analyst with researcher Umetal.com. "China hasn't even agreed to 2009 benchmark prices."

Baoshan Steel shares dropped 0.1 percent to 8.70 yuan at 11:29 a.m. in Shanghai. Rio's shares closed 0.7 percent lower at A$78.62 in Sydney.

Wang and Chen Ying, vice president of Baoshan Steel, didn't return calls seeking comment. Ding is a manager at the company's purchasing center.

Chinese Demands

The four-decade annual iron ore pricing system was fractured last year after Rio, BHP Billiton Ltd. and Vale SA, which together account for three quarters of traded iron ore, refused to meet China's demand to cut prices by more than 33 percent during the global recession.

China is the world's largest buyer of iron ore and last year increased imports by 42 percent to a record 628 million metric tons. Benchmark prices may surge 50 percent this year as the economy rebounds, Nomura Holdings Inc. forecast Jan. 11.

The Chinese police investigation into the Rio executives was completed this week, with the case now referred to prosecutors, both the Australian and Chinese governments said.

The arrest of Hu, the head of Rio's iron ore unit in China, strained ties between Australia, the world's largest exporter of iron ore, and China, its largest trading partner.

London-based Rio Tinto appointed Danny Goeman as the new negotiator with Asian steelmakers, reporting to Will Malaney who was the company's chief negotiator, a spokesman said in December.

China Price

Rio needs to hear from China "as to exactly what their view is in relation to prices," Sam Walsh, chief executive officer of the company's iron ore unit, said Nov. 2.

China wants to set iron ore prices separately from the rest of the world to exercise its bargaining power as the largest buyer, the China Iron & Steel Association said Oct. 16. Annual contracts for China should start from Jan. 1, instead of April 1, the current practice, the association had said.

Cash prices of 62 percent iron-content ore delivered to Tianjin port in China last week climbed to the highest in at least 13 months, according to the Steel Index. Prices had jumped amid "panic buying" by Chinese mills concerned about the availability of cargoes from Australia, Goldman Sachs JBWere Pty. said.

China Iron & Steel Association
iron ore
Rio Tinto

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