Metals News
Chinese Mills Start Iron Ore Talks with Miners - Report
data analysis
Feb 2,2010

BEIJING, Feb. 2 -- China's leading steel mills have begun talks in Singapore with the big three global miners on 2010 contract iron ore prices, a report by the China Times newspaper said.

The report said that delegations from Baosteel (600019.SS: Quote), Wuhan Iron and Steel (600005.SS: Quote) and others were already in the city to hold discussions with BHP Billiton (BHP.AX: Quote)(BLT.L: Quote) and Rio Tinto (RIO.AX: Quote)(RIO.L: Quote) of Australia and Brazil's Vale (VALE5.SA: Quote).

Baosteel refused to comment on the report when contacted by Reuters on Tuesday.

A spokesman for the China Iron and Steel Association (CISA) was not immediately available for comment, and it remains unclear if the association will play a direct role in the talks this year.

The association was heavily criticised for its inflexible negotiating tactics in 2009, when its attempt to strongarm the miners into offering a lower "China price" ended in failure, with Chinese steel firms eventually forced to accept the "interim" benchmark price agreed by Rio Tinto with Japanese mills.

However, Ministry of Industry and Information Technology spokesman Zhu Hongren said last week that the government continues to back "united" iron ore talks led by CISA and the China Chamber of Commerce for Metals, Minerals and Chemical Importers and Exporters.

But Zhu also said iron ore prices were a commercial matter and that Baosteel would represent the industry during the talks.

A Chinese analyst who did not want to be named said Baosteel and the other big mills were under commercial pressure to sign an agreement as quickly as possible but under political pressure to hold out for a better deal.

"Spot market iron ore prices have been rising and settling early is a good idea -- but the mills don't want to be seen to agree too quickly," he said.

Spot iron ore prices in China .IO62-CNI=SI are at $120.50 a tonne, according to the Steel Index, down from a peak of $131.20 last month but double the lows in March last year.

CISA has refused to comment on negotiations this year, but last week the association posted a report on its official website dismissing speculation that the big miners had frozen out Chinese mills this year, preferring instead to deal with their customers in Japan and South Korea.

Baosteel and Rio Tinto have both appointed new chief negotiators for 2010, as they look to repair the damage done not only by last year's price talks, but also by the arrest of four Rio Tinto staff members in Shanghai on charges of industrial espionage.

"Relations between China and Rio Tinto are so poor at the moment. Both sides have got new negotiators, but it takes more than that," said Paul Bartholomew, Australia manager with Steel Business Briefing.

CISA said at the end of last year that it expected miners to demand a 20-30 percent price increase for 2010.


China Iron & Steel Association
iron ore
Rion Tinto
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